TADA Dealers - Media Communication Group

Focus for Today’s Market:Cash andInventoryManagementBY CHIP MAHER, NADA-ATD 20 GROUP CONSULTANTWatch your Cash!Many dealers are not here today because they ran out ofcash. Even profitable dealers got caught off guard withoutenough cash to sustain the downturn. The lack of workingcapital or even failing to meet the manufacturer’s “workingcapital guidelines” can be a serious concern for yourstore. Review and manage your receivables and cash on aregular basis to find frozen capital and root out ineffectiveprocesses. If your customer receivables are above guide (nomore than 50 percent of parts, service and body shop sales)or if there is a substantial amount of aging, it is obviousthat the processes you have in place are not working. Itdoesn’t make a difference how much gross you hold, if youcannot effectively manage and collect the cash generatedby your operations.Manage your Inventory!As the new- and used-vehicle markets have become moreefficient, downward pressure on margins has made turninginventory more important than ever. “Gross per unit” is notthe standard it once was. Now, total gross and turns are keyto profitability. To turn inventory efficiently, you need tohave the right mix (days’ supply to market) acquired at theright price (cost to market) and then priced right (price tomarket). When all three of these components are optimized,you will generate more total gross, turn inventory faster andincrease profitability. 28