Cash is King
The Search for Hidden Capital in the Dealership
Capital can be “hidden” in many parts of the typical dealership. In this article, we will discuss where to find capital in these areas:
Generally speaking, there should be no vehicle receivables more than 30 days old. Problems occur with side notes and hold checks (although just about everybody does it). Not paying off a first or second lien in a timely manner can also be a problem for you.
Don't pay them a commission until all the paperwork (such as the trade title or certificate number) has been submitted and checks have been cashed. When it becomes their money, they'll become more responsive and file paperwork more promptly.
Another problem occurs with promissory notes when customers misrepresent their eligibility. Again, put the responsibility back on the accountable party, the customer. Prepare a preprinted check-the-box form listing the documents needed by the dealership and have the customer sign it. Develop a policy and enforce it.
Have two managers sign off on these notes and review them at every weekly managers meeting. Involve outside sources in managing past-due notes for collection. A completed deal sheet will help ensure that everyone knows what is expected to be in the deal and that the dealer receives it on a timely basis.
What about contracts in transit? Some experts say three days, others say five or, with special finance, 10. A tremendous amount of money can be involved in contracts and you may not know it.
Once again, make it the problem of the responsible party – the finance manager or special finance manager – so they can be part of the solution. Stay on top of it. Talk with them every day about this.
With trade receivables, body shop records and parts wholesalers are typical problem areas. Review these receivables in the weekly managers meetings.
Set a timeframe to follow-up with customers then, if that is not successful, have a time set to turn these receivables over to collections. Remember, it's your money.