By Eric S. Hurst, Executive Vice President and Chief Operating Officer, National Lenders General Agency, LLC

Every economic report says to brace for a coming recession.

Interest rates are increasing.

When customers struggle to afford the basics, choices are made. One of the first things they do is to stop paying car insurance. Cancellations go through the roof. Buy Here Pay Here dealership teams spend significant time tracking insurance. The process is tedious, fraught with delays, human error – and costly in terms of real dollars and operational efficiency.

Dealerships look to drive operational excellence as a strategy to increase profits and build long-term viability. Look for ways to streamline the business. Start with a simple math formula. Divide the sum of your total operating costs by the sum of your revenue to derive your operational efficiency. The higher the number, the lower the cost to generate the same income.

Identify the expenses associated with producing revenue. What improvements can you implement for greater efficiency? For example, insurance tracking is a major black hole for most dealerships. At a time when every dealer is looking to cut costs, few tools reduce expenses better than automated insurance tracking.

Automating the insurance tracking process has significant financial upside. In our experience with dealers, we often find businesses allocating up to three full-time employees with benefits to insurance tracking – a total monthly cost of $3,000 to $10,000. Automating the process allows these same dealers to spend between $300 to $400 a month per 1,000 accounts.

If dealers aren’t full-time tracking, they’re getting part-time results and losing substantial revenue. Wouldn’t your dealership be better served putting that same employee to work on collections instead of tracking?

As you “brace for impact” and work to optimize operational efficiency in your business, realize that sometimes the old adage is true. It often makes more sense to “spend money to make money.” Create efficiencies that help your dealership run better and stay ahead of downtrends.

 

About the author: Eric S. Hurst