Estimated reading time: 5 minutes
Expense control is, without a doubt, a critical, recurring, and necessary task to ensure the health of a dealership. But is it easy to do?
Until not long ago, this task required cross-checking reports, exporting data from a system, waiting for an email from a controller or an administrative assistant, and keeping your fingers crossed. But it doesn’t have to be this way. The business has changed, competition has intensified, margins are shrinking, and expense control has taken on an even more prominent role.
Have you asked yourself any of these questions?
- Is the administration and accounting area allocating expenses correctly?
Poor classification between fixed and variable costs prevents a true expense analysis. We cannot accurately calculate the absorption rate or the break-even point if expenses are not properly classified. - Was there a structural change that caused fixed costs to jump (new employees, supplier contracts, outsourcing, construction, new services, etc.)?
- Is the fixed cost structure oversized? Could it be that we have a structure designed for a level of sales that is no longer being achieved?
- Were there increases in services, outsourced workshops, or service errors that the dealership ends up paying for?
- Why are expenses double what we budgeted?
The answers to these questions won’t come from conversations with each manager, but from the cold analysis of real data.
Expense Control in Dealerships Using Analytics
When it comes to controlling performance (margins, targets, expenses, etc.), there are two crucial points to keep in mind:
- Everything happens for a reason, and those causes must be uncovered.
- We cannot rely on gut feelings, “from memory” data, or spreadsheets that pass through several hands before arriving.
Today, businesses need a clear X-ray of their operation—first-hand, up-to-date, real, and reliable results. In the image below, we see exactly that: a dashboard built with live data coming directly from the DMS (in this case, Autologica Sky DMS).
On a single screen (without drilling down), we can already draw several conclusions about the dealership:
Fixed expenses are above budget. Spending is 20% higher on a category that is supposed to remain controlled.
Sales increased, but variable expenses did not—so is the administration area allocating expenses correctly?
When analyzing by department, we see that the Sales department exceeded its fixed expense budget by 47%. Meanwhile, the Service department recorded higher expenses, both fixed and variable.
Once Deviations Are Identified, It’s Time to Investigate
The purpose of measuring is to act on data, so we can’t stop at a “tragic” expense analysis. The natural next step is to investigate: understand why these deviations occurred, verify whether expenses were correctly allocated, determine whether each department is controlling its budget, and identify which accounting accounts are generating the highest costs.
This is where the true power of analytics tools comes into play—the ability to drill down from the general to the specific, in a nearly detective-like process.
Returning to the Sales department, in the following case, an analyst, controller, or concerned owner drills down until reaching the inflection point in the budget.
The conclusion is logical: construction work was carried out on the premises to increase vehicle capacity and boost sales.
ABC (Pareto) Expense Analysis
Expense analysis is completed with an 80/20 review: which 20% of expense items account for 80% of total spending?
This is a key analysis applied to virtually all departments and processes. It helps prioritize and structure the analytical work, avoiding a chaotic approach and instead focusing first on the most significant expenses.
Category A Expenses (20% that represent 80% of total expenses):
- Headquarters expansion
- Administrative staff salaries
- Sales staff salaries
- Outsourced work
- Vehicle inventory insurance
Successful Decisions Are Always Backed by Data
With dashboards and tools like these, owners and managers can make real decisions, understand what’s happening in each department, and maintain agile, comprehensive control over critical issues such as expenses.
Dealerships that continue to rely on manual information—passed through multiple hands and delayed by hours (or sometimes days or weeks)—are operating on trust, not on the empirical reality of their business.
