Cash is King

The Search for Hidden Capital in the Dealership

Following is the second in a series of articles on unlocking hidden capital in your dealership. Capital can be “hidden” in many parts of the typical dealership. In this article, we will discuss where to find capital in warranty receivables, finance reserves and other receivables.

Warranty claims are now paid weekly, in most cases, so nothing in your system should be older than seven days.

Primarily, you should look at the older warranty claims. The 30-60-90 day aging system is generally no longer in use. Most dealers discontinued it eight to 10 years ago.

What do you need to look for in warranty?

• Be especially alert for special submissions that require the representative's authorization. Be ready when he visits your dealership so you don't miss him and have to wait for his next visit which could be 30 to 60 days later.
  
• Review and act on all “bounced” submissions and resubmit them within two days to get paid.
• All repairs need to be done before the claim is submitted. Be sure to get the paperwork to the warranty administrator promptly so it can be submitted.
• Have one person responsible for warranty claims.
  
• Investigate any rejections or bounced warranty claims.
  
• Be sure the claims register is posted promptly so you'll know the schedule is up-to-date.

Remember, with bank accounts, play the float. The controller moves the money to the offset account against the wholesale, then initiates a sweep account so they invest any money left over. Be sure your fees don't exceed interest you get on it. Also, you can move some funds to zero-balance accounts to use excess cash of one store to cover another store if there is a tight cash situation.

While there typically is not a lot of money in finance reserves, it's worth looking for every bit of hidden capital in your dealership. A suggested guideline would be: less than 130 percent of the previous month's production - make sure your balance doesn't exceed that. A firm date – like 40-45 days to be paid – should be on the statement. Look for other hidden capital in miscellaneous places such as employee loans and health insurance, and be sure to stay on top of incentives and rebates. Remember, it's your money .