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Part 2 In the May/June issue I discussed overall areas to improve the special finance departments. This article will cover in detail certain areas for immediate improvement. Reports and Tracking Successful finance departments maintain accurate daily reports and constantly track activity ranging from sales calls; appointments made vs. kept, closing ratios, deliveries, and profit and lender status. In order to successfully manage a special finance department managers must maintain accurate daily records. This allows department changes on the fly as opposed to waiting until the end of each month to determine what went right or wrong. The follow represents areas that should be monitored and the importance of each one. |
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Appointments Made / Kept The ratio of made to kept appointments should be at least 70%. When this number falls below the benchmark immediate action must be taken. Persons talking to prospects by telephone are either giving too much information or not emphasizing the need to show up. This will also revel advertising that generates lots of calls from customers who either do not qualify or are not serious. This will show up immediately so advertising can be changed or modified. All percentages should be maintained daily are based on month to date information because daily numbers do not take into consideration kept appointments that show up days later. This should be reviewed weekly with management and sales. Closing Ratios The closing ratio can be calculated one of two ways. The first way would be the number of deliveries vs. the total number of write-ups. When this formula is used it should be at least 60%. The other method is to take the total deliveries vs. ALL special finance prospects. When using this formula the number should not fall below 20%. I have found that with special finance customers it is more accurate to base ratios on deliveries vs. write-ups. This gives a more defined picture of the department's success plus follows the look to book ratios maintained by lenders. Accurate closing ratio reports should also include number of deliveries, gross profit and average age of vehicle sold. You may want to add a category that tracks the average price of vehicles sold in order to maintain proper inventory and turn rate. This type of report is imperative when meeting with management on issues such as advertising and inventory. Again when numbers fall below the benchmark immediate action should be taken. Lender Ratios National special finance lenders now monitor dealer and customer ratios daily. In many cases this information is available to the underwriting and funding managers on the fly. Because of this it is more important now than ever before to maintain accurate lender ratios. Look to Book, Funded to Approved, Funding Time and First Payment Default ratios will influence relationships with lenders. This information should be used as a positive relationship building tool that insures solid growth in the special finance department. Lenders pay attention to ratios because of the cost involved in looking at applications and funding loans. Dealers with higher than average percentages favoring the lender will see noticeable improvements in approvals and funding. These numbers should be reviewed with management and each lender monthly. Positive steps should be taken when percentages fall below a lender benchmark. In closing, the time it take to properly track a special finance department is minimum compared to the consequences resulting from not managing by the numbers. Refer back to a previous article entitled "Managing By The Numbers" for additional reference material. Do not take the approach or attitude that you must complete daily reports because the boss wants them, instead adopt the mindset that reports provide a great mirror allowing you to manage your success. Good Selling, Paul Snider Paul Snider is the President of VOISYS Systems Corporation and nationally recognized expert in the special finance industry. 
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