Generating cash is an important part of operating a dealership but not always an easy task. Trent Hummel, consultant and trainer for the Western Equipment Dealers Assn.’s Dealer Institute, explained in a recent Farm Equipment webinar how simple actions like examining expense reports and arranging for payment as services are rendered can improve cashflow.
This is the first in a series of articles based on Hummel’s webinar. Part 2 of this series covers optimizing the parts department, part 3 covers billing & the service department and part 4 covers wholegoods.
Avoid Inhouse Accounts Receivable
Hummel pushes dealers to move to “pay-as-you-go” systems as opposed to utilizing inhouse accounts receivables, as well as recommending dealerships utilize manufacturer and OEM’s account receivable programs. He recommends “getting customers off in-house accounts receivables. Dealerships are not banks; they need the cash.”
Dealerships can also utilize independent accounts receivable providers (taking note of potential fees or penalties to customers). He recommends they ask government accounts to switch to credit cards, which Hummel says many will do as they earn points or receive cash back.
Breakdown Expenses, Involve the Team
Hummel encourages department managers to review their expenses for areas of potential reductions. One important area can be negotiating with and changing various service providers. Hummel gives the example of his own dealership. “My cousin was mad because our dealership insurance provider increased our rate by 30%,” he says. “He drove home for lunch and noticed a park bench ad for an insurance company. He called, and they were 30% less than our current rate with the same coverage. We’re still with this company 15 years later, and only because my cousin was upset with an unexpected increase notice.”
Taking it a step further, getting the department team involved in examining expenses can further help reductions. Employees with a boots-on-the-ground view can say for certain what expense is and isn’t necessary. He stresses that it’s key for a dealership to have a culture where employees are not afraid to come forward with ideas. As part of their role, it’s equally important for department managers to be asking for and being proactive regarding expense management, he says.
Hummel will be presenting a session at this year’s Dealership Minds Summit 2020 titled “Tracking Used Equipment Trends & Following the Data,” where he’ll share data tracking used combine inventory by country and by brand to unearth whether the industry is growing or reducing used combine stock.