Are you using what you bought?

Maximizing the computer system

When you purchased your first computer and software for your business or when you decided to upgrade to new equipment and software, you likely looked at or were told about the various modules that were a part of the software package.

Perhaps this situation bears a strong resemblance to the occasion when you purchased your last cell phone. If you worked with a good salesperson, you were told about all of the features that were a part of the new phone. Most likely after you heard about the first two or three features, you began to mentally overload and the rest of the information went out of your head just as quick as you heard it.

That computer purchase could bear a strong resemblance to the cell phone purchase; you may have thought that as long as you could operate the basic features of the software, you would get to some of the more elaborate details at a future date. Now that you have had your computer system for a while, how are you doing with utilizing all that information?

The experience of this writer in visiting with dealers is that there are a lot that do not utilize many of the features of their system. I always looked for a system that included the six aspects of the business: accounts receivable, accounts payable, point of sale, inventory control, payroll, and general ledger. My concern for having a system that did not allow me to integrate all these components came with the occasion when you have to import information from one component to another.

If there is an error as you create your financial statements, the natural question would be to ask where did the problem come from. Was the error in an outside service you used to prepare your payroll, or did it occur as you imported data from something such as Quicken or Quick Books?

While point of sales seems to be the first component dealers utilize, many fail to provide the inventory component with actual inventory counts. Manufacturers provide dealers with reports indicating the velocity code of the parts they produce. The velocity code is an indication of how fast a particular part sells. Armed with this information, the appropriately stocked dealer can be assured that when a unit is sitting on the bench, the necessary parts will be sitting on the shelves.

The velocity code, adjusted to your particular dealership by your computer system, can help you to finely tune your inventory levels. Doing so will help you maximize your profits which is why you initially purchased the computer system.

The accounts receivable system is the other component, like inventory, that is a natural to be integrated with the point of sale. Having house charge accounts is an easy way to grow your customer base – both individual and commercial accounts. However, as you make a sale to a house charge account, the money necessary to purchase whole goods, parts, pay salaries, and other bills must come from other sources.

The concern for house accounts comes with the amount of time it takes to collect these receivables as well as the possibility of those accounts that become uncollectable. The accounts receivable component of your computer system will likely be able to provide you with an aging report. To avoid problems with delinquency and uncollectable accounts, you should be looking at this report on a regular basis.

The accounts payable component is one that many dealers fail to utilize. Properly used, the accounts receivable component can give a dealer a good idea about his cash needs for several months to come. As your vendors invite you to pre-book whole goods and parts each year, it is important that you are able to accurately forecast your ability to pay these sizable shipments each spring as they come due.

Perhaps it is because of the number of service companies available that dealers often decide to outsource their payroll work. Other reasons for outsourcing include a lack of knowledge, complexity of laws regarding pay, or concern for performing the job correctly.

While all concerns are initially justified, they can usually be resolved by either one of these two, if not both sources. The first would be the software support people and the second would be your accountant. Getting the payroll module to accurately calculate the payroll and the various taxes you must report and pay is a matter of several settings. When there is a change in the tax rate or the deductions an employee is claiming, either of these two people should be able to guide you through the appropriate keystrokes.

For general ledger to work completely, you will need to have the other components of your system working. While this may sound like a daunting task, the payoffs to your business are substantial. Compare these two situations. The first involves taking your check book stubs, bank statement, invoices and all the supporting material to the accountant while waiting several weeks for the accountant to prepare a financial statement for you. The second situation is one in which you have each of the modules total and balance their month’s functions. From each of those modules, inventory, payroll, point of sale, accounts payable, and accounts receivable, you move that information into the general ledger module.  Now let’s look at the differences.

The first difference in the two situations is that you have performed the second situation yourself. Your investment is a couple of hours of your time. A second difference is that you will have this information within a few hours as compared to a few weeks. The advantage to this will be that you will be making changes in July based upon what happened in your business in June. If you are receiving the information after several weeks, you could find yourself making changes in August based upon June’s business, and yet not having any idea as to what happened in July.

Then there is the difference of using what you have paid for. Again, as I have visited with dealers, I have never understood why they have spent their hard earned profits for a complete computer system while only utilizing a couple of modules. It is similar to buying inventory and sitting it in the warehouse so that no one will ever see it or purchase it.

Another difference is that from having learned how these modules work, you will have an understanding of the financial side of the business that few dealers have. Unfortunately, too many dealers spend their time learning only the technical side of this business. All dealers should have this financial understanding.

Making the decision to computerize your business is truly a wise decision. However, the wisdom is shown only as you utilize all of the modules of your system to their fullest.

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This article is copyrighted by Tom Shay and Profits Plus Solutions, who can be reached at: PO Box 128, Dardanelle, AR. 72834. Phone 727-823-7205. It may be printed for an individual to read, but not duplicated or distributed without expressed written consent of the copyright owner.