For the most part, business owners and senior management have a good oversight of the ageing of their vehicle and aftersales debts. But what about the more tricky factors that need reviewing, such as warranty or bonus debts?
When we visit a business that has had problems with debt recovery, more often than not, the warranty or bonus account is involved.
Most franchises now credit warranty claims more than once a month, so any debts over 30 days would be deemed unusual. The warranty controller should be offering an explanation of these items and be putting together an action plan on collection.
Identifying key problems
A problem typically arises for one of two reasons:
- work was performed under warranty that wasn’t covered; or
- the claim wasn’t submitted properly.
Not identifying one of these problems early could cost businesses hundreds of thousands in lost income.
In our experience, bonus debtors are often not monitored outside of the accounts team; once the sales team have attached it to a car, there is often no check to make sure it was ever received. The process of claiming some bonuses can be difficult, for example, determining the exact code on the system. It can take months for a problem like this to be identified and by then the business is reliant on the goodwill of the manufacturer to pay. The bonus account is also an easy place for fraudsters to manipulate profits to hide poor performance.
The way Dealer Management Systems (DMSs) work, and the nature of bonus itself, makes producing a report on ageing and type direct from the system difficult. However, most systems are capable of generating a report that can include a date for bonus added through the vehicle module to individual motors. These types of bonus are generally paid the month following registration and management can focus on items over 30 days for explanation.
For other types of bonus management, companies will be reliant on the accounts team providing them with details of what is outstanding. A good report should be produced each month to show the age and types of bonus that remain outstanding, so that the sales team can explain why amounts have not been received.
Should you have any questions about this blog, please do not hesitate to contact Paul or a member of the team. Alternatively, for more of our commentary on key automotive sector issues, visit our automotive industry issues section.
