Three Practical Steps to Boost Cash Flow




I want to open this post with a joke about “Captain Obvious,” but I’m not sure as I’ve discussed this topic with several dealers recently.

 

Whatever your short-term objectives (better inventory management, increased lead conversion, lower operational costs, etc.), the ultimate objective is to increase the amount of money you have left over at the end of the day.

 

In that spirit, here are three suggestions to increase cash flow:

 

1 – Make your e-contracting process more precise.

 

The faster you get paid, in principle, the better your F&I office is at processing agreements through eContracting. It might be as basic as examining the forms that are offered in your local market or as involved as changing the person in charge of daily wet-ink form delivery to lenders to increase the effectiveness of e-contracting.

 

Monitor the effectiveness of the floor plan.

 

Do you know how many of the unleveraged automobiles on your lot meet the requirements for Floorplan? There is no reason not to leverage your inventory for cash when both captive and non-captive lenders provide extremely competitive Floorplan interest rates and payment periods. In order to take advantage of affordable floorplan prices without having outdated inventory eat away at your profitability, continual monitoring is needed because your inventory is constantly moving.

 

3. Quit rolling over unfunded deals.

 

Yes, Florida, we’re referring to you. And yes, it is still possible to reach 40% service contract penetration on 250 new cars per month without engaging in any kind of elaborate strategy. Your F&I managers may object, but if they can’t sell products to qualified customers on funded deals, tell them Verizon is hiring.

 

The way you manage your cash has a much greater impact on your organization than any other procedure. Leaks can be stopped by putting in place a new procedure, but without constant examination and improvement, new leaks will continue to appear.

 

Leave a comment below if you know of a better strategy to increase cash flow or if you know why previous attempts like this failed. Ask my wife; I don’t know everything.