Posted on September 22, 2020 by Travis Peterson
As the saying goes, the only guarantees in life are death and taxes. For dealers, you can add a third: audits.
The general trend in the industry over the past few years is manufacturers auditing more frequently, on a smaller scale. Manufacturers are struggling in the time of COVID-19, and it’s likely that increased audits will be a source of revenue for OEMs.
Many dealerships are also facing economic hardship due to the disruption caused by the pandemic. Now more than ever, it pays to be proactive in reducing liability to manufacturer warranty charge backs.
Once this crisis passes – and it will – where do you want your dealership to be? Now is the time to put documentation best practices in place to protect your business.
In a typical warranty audit 50-100 VINs are reviewed, depending on the manufacturer. Producing the required documentation for an audit is expensive in itself: a lot of labor hours are involved to pull and re-file all requested documentation. Compiling all those documents can lead to misfiling down the road.
Worst-case? You may be forced to fire your warranty administrator or service manager for failing the audit. This can lead to additional loss in productivity while you get someone new up to speed.
Fortunately, the following five steps can help you decrease this liability:
- Scan all related documentation for easy, online retrieval.
A missing document could cost your dealership an expensive charge back, so it is crucial to scan all documents including signed invoices, receipts, technician notes, diagnostic tests, and warranty claim reimbursement forms. Using a document scanning provider, you can quickly find all documentation associated with each VIN through web-based software for a painless, smooth audit. You can image how much easier it is to type each VIN into a search bar than it is to hunt through filing cabinets for hundreds of documents. It’s a simple solution with a big payoff.
- Keep accurate and complete repair orders (ROs) online.
By scanning and archiving your ROs online, auditors can access the requested information from anywhere as opposed to coming to the dealership. Keeping records online allows you to maintain them for the full retention period without taking up valuable floor space or dedicating employee time to searching through document boxes. Scanning also eliminates the risk of an employee altering the information with white out, black out, erasers, etc. Consider a third-party document management platform that is DMS-agnostic for your archives. Housing documents outside of your DMS guarantees they will be available anytime and from anywhere, even if you end up switching DMS providers.
- Find a trusted consultant to review your dealership policies and procedures.
Automotive consultants can help identify areas of concern prior to a warranty audit. These consultants specialize in the industry and know the process from working with other dealerships. The consultant can also recommend record retention and parts retention best practices and how to document consistent with standards. They will customize internal auditing procedures for your specific dealership or dealer group. Many also offer self-audit checklists so you can perform informal audits on a regular basis.
- Designate an employee or vendor as your Compliance Officer.
No dealership, large or small, should go without a compliance officer. This person should regularly spot check claims to ensure all supporting information is in the system and perform mock audits by randomly pulling a few job cards (warranty and shop copies) to ensure customer concern descriptions are clear and concise, bills fit the dates and times, and necessary signatures are included, etc. Performing self-audit reviews will most prepare your dealership for actual audits. When it is time for an actual audit, this designated compliance officer will handle the claims from beginning to end. This person should not be the service manager or the warranty administrator; this helps keep the self-audit process honest.
- Host annual employee training sessions on the auditing process and internal procedures.
The warranty process is complex and should be reviewed regularly with the team. Service and parts employees may need to be properly trained on documenting hours and repair work. Employees should make sure dates and mileage are recorded correctly. For example, technicians must note what was found as the cause of the customer’s concern and what was done to correct it to complete the 3 C’s (Complaint, Cause, Correction). The absence of one of the 3 C’s on any line may result in a chargeback during the audit. Documents of customer eligibility for incentives must also be documented to avoid being classified as fraud by the manufacturer. One employee not following the process could potentially cost the dealership thousands of dollars. Informing your team is key, they need to know what an auditor is looking for during their review in order to be prepared.
There are many helpful and free “self-audit checklists” available online. For example, this GM and Chrysler checklist breaks out the primary points that auditors look for by job category. Conduct an online search using keywords “self-audit” and the name of the vehicle manufacturer. Every manufacturer can also supply a list of audit requirements.
Don’t let expensive charge backs eat into your bottom line. Follow these 5 tips to ace your next audit while cutting preparation costs and time.