Collaborative expense reviews pay off

New vehicle sales remain on the up and up. July 2013 sales of new light vehicles increased 14% over July 2012, and year-to-date sales were up 8.5% through July 31, according to Motor Intelligence data.

As the market revs up, resist the temptation to splurge. Spend as if you were still operating in a recession. To get a better handle on cost containment, consider incorporating collaborative expense reviews into your weekly management meetings.

Everyone achieves more

Scrutinizing expenses by employee and department is time consuming and turns owners into the “expense police.” No one likes to be the bad guy. So, use collaborative expense reviews to share the odious task of reviewing costs with all your managers.

When you make expense reviews a line item on your weekly agenda, you get fresh, objective insight from a team, rather than relying on yourself (or your CFO) to make unilateral spending decisions. Collaborative expense reviews also expose managers to how other departments run and they create a greater sense of buy-in and accountability.

Peer pressure can even make managers more conscientious about overall spending. It might make them more frugal when it comes to overhead costs, such as postage, overnight shipping and electricity usage. And a more collaborative environment might even make a would-be fraudster think twice before pilfering parts or office supplies.

A long-term benefit of collaborative expense reviews is that the process trains managers to take on more responsibility — and possibly take over the dealership when the owner retires. Through this process, owners of family dealerships can see firsthand how second-generation managers interact with peers and gauge whether they’re ready to take the reins.

Collaboration fosters disciplined spending

Here’s an example of how the collaborative expense review process works. Sales manager Jim proposes an incentive program that offers free gas cards to anyone who test-drives a new vehicle. The management team discusses the proposal at the first weekly meeting in August. Service manager Tom raises concerns that the program is too open-ended and could cost the dealership thousands of dollars. So, the team asks Jim to refine his proposal and try it first on a small scale.

The following week, Jim presents his updated plan. He will e-mail his sales team’s top 100 leads an invitation to participate in a pre-Thanksgiving sales drive. The first 20 e-mail recipients to test-drive a new or used vehicle will receive a $20 gas card. Jim hopes to achieve a 20% response rate. The management team approves Jim’s amended proposal.

A few weeks later, Jim reports that only 10 customers responded to his program and only three purchased a vehicle. The parts manager Betty is skeptical, and thinks the free gas cards didn’t factor into the customers’ buying decisions. The management team discusses whether to abandon the program or launch it on a larger scale next month.

The collaborative process works for all types of spending. Dealers can use it to evaluate inventory and supply orders, vendor and insurance bids, showroom additions and remodels, and hiring proposals.

A best practice

Collaborative expense reviews have emerged as a best practice way for auto dealers to control costs. Although the process is a major cultural shift for old-school dealers, it’s a worthwhile change. These days, dealers can’t afford to be complacent about spending.