WardsAuto – Car Dealers Should Join Automakers in Quarterly Reporting
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By Phil Villegas
Read the WardsAuto Article here
For auto retailers, monthly sales reports (as required by automakers) paint a somewhat inefficient and non-representative financial picture.
Last year, General Motors was the first major manufacturer to cease reporting sales on a monthly basis and shift to quarterly reporting.
Ford followed suit this year and Fiat Chrysler recently announced it would too.
Prior to that, Tesla was the only mainstream automaker to report quarterly, not monthly.
The move essentially gives the OEMs some latitude in having to explain monthly spikes and/or drops that can be seasonal or tied to fleet sales, allowing them to gain better control of the message when reporting quarterly.
While I agree with the shift, I can only wish this would trickle down to dealers.
For dealers, monthly sales reporting paints a somewhat inefficient and non-representative financial picture. It can misrepresent the broader operating environment.
If you look at the actual lifespan of an actual new-vehicle transaction – from the time the vehicle is ordered to when it is retailed to when dealer incentives are collected – a quarterly picture is far more representative of this environment.
For many dealers, the value of some of their personnel, inventory and marketing strategies is only as good as last month’s financial performance.
This approach often leads to impulsive reactions. Those include the hiring and firing of personnel, changing inventories and reworking ad campaigns.
Also consider the giving-birth-like labor pains most accounting departments go through every month to produce a dealer financial statement.
For most dealerships, the accounting office becomes a hazardous area to approach during the first 10 days of the month as it works to produce the latest financial statement.
The primary driver behind this exercise is to comply with a manufacturer’s deadline.
If GM, Ford and FCA are going to quarterly reporting, can you imagine the benefits this could have on dealers if they did the same?
There would be significant administrative savings. Moreover, dealers would benefit from a longer performance outlook in terms of marketing, inventory and personnel management.
The largest challenge with quarterly reporting is ensuring dealership management maintains a monthly sales mindset in a quarterly reporting environment.
The greatest benefit of monthly reporting is how it fosters a short-term goal mindset and the tenacity to hit those monthly targets.
This process can be managed and not compromised if dealers maintain internal monthly sales objectives and performance bonuses in a quarterly reporting environment.