The Eight Most Common and Costly Mistakes in Managing Incentives
When it comes to incentives, it’s not small “potatoes” and definitely not a simple task. Nor is it for beginners; with a maze of information to maneuver through, transactions, requirements, and processes, the steps from customer offerings to the incentive payments are numerous. Therefore, it requires an effective staff and system to ensure that it’s done properly, successfully paid, and then compliant so that an audit won’t take it all back.
Hinging on it also, is the dealer’s ability to be competitive, move inventory, and be profitable. But there are often missteps and mistakes that occur and derail those abilities. Here are what I find to be the most frequent costly mistakes in managing incentives:
Not using available tools
OEMs provide ‘Vin Search’ tools that determine vehicle eligibility. It must be performed for every vehicle sold and a printout must be filed in each deal. But incorrect information (e.g. vin number, sale date, sale type) can cause inaccurate results. In addition, AIS Rebates Inc. (MI) has great products such as Incentives Reference Sheets (simplifies and consolidates current incentives) and new Compatibility Logic web-based applications (structures deals with best customer payment scenarios and dealer profit opportunities).
Missing or wrong documentation
Not securing required/correct proof documents from customers at the point-of-sale (registrations, coupons, certificates, membership IDs, etc.); preapprovals not performed to validate eligibility; incomplete/blank documents won’t cut it—they’re still considered non-compliant.
Not utilizing checklists
Without a thorough checklist and approval process, required documents/information are missed or completely forgotten, creating non-compliances. It can also eliminate other errors and fictitious sale tactics.
Improper customer profiling, offering “free-for-alls” for specific/targeted customers or simply not knowing the rules and exceptions, this means no proof or required documents.
Incorrect pricing and disclosure
Excessive doc fees; incorrect sell price and premature model-year reductions for factory employee/supplier sales—Each carry specific or multiple associated debits. Not itemizing all passed incentives on the buyer’s order and customer incentives form can be a debit issue.
Delivery reporting errors
Incorrect delivery dates (not knowing OEM’s definition of a valid sale or system default date not changed), customer name/address (turn-downs/unwinds not corrected), and/or sales type; vehicle not reported sold (not reconciling inventory to CDR/RDR count)—These serious issues can trigger chargebacks and even loss of dealer bonus payouts. Also effects warranty dates, recalls, payoffs, CSI, sales rankings, etc.
Sales staff reporting deliveries (CDR/RDR)
Should be a business office access and function only (even for month-end, weekends or changes). Otherwise, it’s a conflict of interest and too much to gain for sales personnel.
Factory receivable incentives schedule issues
Over-age balances, missed set-ups, credit balances, unresolved rejects, and/or chargebacks and unnecessary write-offs. Money sitting on paper vs. in the bank is never a good thing.
So what’s driving these mistakes? The lack of proper training, execution, no oversight, or regular compliance reviews to find and eliminate problems early. It could be any one or more of these. Your staff must know the rules, program types, exceptions, required documents, and application process. Otherwise, it could make or break you; your success and bottom-line depend on it. What’s even more costly, however, is thinking that this doesn’t apply to your dealership.
Sherralyn Peterson, automotive incentive specialist, with 30 years of automotive experience, helps dealerships prepare for sales audits, conducts compliance reviews, reconciles receivable schedules, performs staff training, and resolves incentives issues. For more information, call 312-310-8380, email email@example.com, or visit www.sherralynpeterson.com.