One of our members recently sought input on how to reconcile monthly and annual inventory for parts - an ongoing struggle for many parts managers. "I've been with my current dealer group for 8 years and have never once met with our controller for a monthly or annual inventory rec," read the posting on the DealersEdge forums.
Controller Holly Elpers of Crystal Motor Car Co., Inc., Crystal River, Fla., responded, explaining how her five dealerships with five parts departments have tackled this task and gotten down to a 0.04 percent margin of error the prior month. "Each month, the parts managers must submit a reconciliation
We do have a very detailed procedure: spreadsheets, timelines, etc., and it does take both the parts manager, controller/office manager, and yes, even a little help from the service manager working together - it's not the responsibility of just one manager," she wrote.
"If you are interested, I can forward our procedures, but it's not for the faint-hearted. It's pretty detailed, but now that we do it all the time, it's not such a big deal. And the kudos from the dealer are WELL worth the trouble," she continued. More than 40 forum participants requested Ms. Elpers material over the next week or so. She was kind enough to share it with The Parts Manager and discuss it with us in more detail.
Little things mean a lot
"Prior to these procedures, we were running anywhere between 2 percent and 6 percent (variance) - which doesn't sound alarming until you do the math. On an inventory of $1 million, 6 percent is $60,000
that was a number the dealer couldn't live with. Little by little, we started identifying different areas that affected the three sides of parts inventory: general ledger, parts ledger, and physical," Ms. Elpers tells us.
"We found various receiving practices, selling practices, and many other idiosyncrasies that are common in the auto business that, with the timing of our month-end reports, had affected one or two of the areas, but not all three," she says.
"The first couple months seemed trying when identifying problem areas. But once all the parts managers got used to the potential stumbling blocks, they were able to correct them before they became a problem, thereby making the reconciling process not as daunting. Now when we have a spike in the percentage we are off, we are able to track back each procedure, and have been successful in finding the differences within reason," she says.
Ms. Elpers and her chief financial officer developed these procedures - which included a Parts Inventory Reconciliation Worksheet - over a couple of years, with input from the auto group's parts managers. "They are living documents to which I seem to be adding every couple of months when we realize there are still reconciling items slipping through the cracks that we haven't considered," she tells us. To see the documents she shared with us, go to www.dealersedge .com and click on "Free Stuff."
Do you have a strategy in place that's helping you save time or money, boost cash flow, improve employee relations, make better use of technology or anything else? Share your dealership success story with us. E-mail Jeri Bier at firstname.lastname@example.org or send a fax to 800-314-4770. Got questions on how to improve any process or problem? Send us those too and we'll help you find an answer.