outside part purchase

[Zep33]

Pretty sure GM gives a 10-15% leeway before it fails the price filter

[marko65]

As far as I know I have not seen any parts on the Unrecognized list when we bump up the cost, usually when the price is lower than cost is when they are on the shit list. We change the cost price to reflect -242-. we do not change 688 manually.

[LOWAIRD1964]

On an outside parts purchase from another dealer that is warranty where should the money go that we get reimbursed from gm. The difference basically that gm is paying us back for.

[PartsPlant81]

Ours goes into 24600

[sipps]

This is baffling to me. Newer manager (21 months). I took over a department that kept cost the same, and +687! What we do now is change the cost to actual cost paid to the dealer. We pay trade pricing from local dealers. Then mark it up 40%. We then bill out a Z5000 part number on the same warranty line with zero cost and sale. Lastly, we mark a copy of the invoice with Z5000 and attach it to the RO. Warranty clerk submits the claim with the invoice to GM. GM has always paid the markup, and never affects loyalty %. Now I've had consultants try persuade us to use 688 or 687. My question to the forum is why would you not change the cost? if you don't, then the Parts Department is eating the cost and losing gross profit. Especially if you're +687 them. Service gets half of the gross profit. You just ate the entire p/u cost.

Like I said, I'm new, but this way makes much more financial sense to me.

[TimK]

If it's warranty service gets none of the gross profit.
Leave the cost alone, file a claim for Z5000 and make sure it gets credited to the cost of sale.
We bill Z5000 on the warranty line for the amount we paid over cost (cost and sale are the same amount).

If COD then yes change the cost to reflect the actual cost if you picked the part up.

[PartsPlant81]

This is baffling to me. Newer manager (21 months). I took over a department that kept cost the same, and +687! What we do now is change the cost to actual cost paid to the dealer. We pay trade pricing from local dealers. Then mark it up 40%. We then bill out a Z5000 part number on the same warranty line with zero cost and sale. Lastly, we mark a copy of the invoice with Z5000 and attach it to the RO. Warranty clerk submits the claim with the invoice to GM. GM has always paid the markup, and never affects loyalty %. Now I've had consultants try persuade us to use 688 or 687. My question to the forum is why would you not change the cost? if you don't, then the Parts Department is eating the cost and losing gross profit. Especially if you're +687 them. Service gets half of the gross profit. You just ate the entire p/u cost.

Like I said, I'm new, but this way makes much more financial sense to me.

We get 81% for warranty so we don't touch the cost; profit does not get affected.
The difference goes to 24600 so the cost difference does not affect profit either.
When you play with cost you have a greater risk of lowering your profit for that sale. I NEVER touch cost.

[sipps]

This is the very reason why I feel so fortunate to have found this forum. I get so many different perspectives on what is working and not with other managers. I'm more "new" than "old" school when it comes to GM accounting. With GM there's really only one way they want you to do the outside parts purchase accounting. +/- 688 debits and credits. And, it is nice because 246 is an asset account for sublet repairs that does not show up on your statement. 688 is a cost of sale inventory adjustment account that is on the statement. For me there is a wrong way to do it, and not changing the cost is it. I won't put it all on here, but you guys are loosing a lot of profit. Partsplant if you're at 81% then you're loosing a significant dollar amount of profit.

[PartsPlant81]

This is the very reason why I feel so fortunate to have found this forum. I get so many different perspectives on what is working and not with other managers. I'm more "new" than "old" school when it comes to GM accounting. With GM there's really only one way they want you to do the outside parts purchase accounting. +/- 688 debits and credits. And, it is nice because 246 is an asset account for sublet repairs that does not show up on your statement. 688 is a cost of sale inventory adjustment account that is on the statement. For me there is a wrong way to do it, and not changing the cost is it. I won't put it all on here, but you guys are loosing a lot of profit. Partsplant if you're at 81% then you're loosing a significant dollar amount of profit.

Please enlighten me on how I am losing profit? If I changed my cost my profit margin would decrease. I make 45% gross profit on every warranty part that I sell.
When you increase your cost for a part and your sale price is a specific markup that is pre-determined (Warranty Markup) YOU are LOSING profit.
E-mail me at nplant[at]jimmurphycars[dot]com if you want a more detailed example of how changing cost affects your profit.

[sipps]

I don't need an example. I'm not on here as an expert. I don't know everything. I use this forum as to gain perspective and learn how to make my dealership the most profit possible. I'm happy that you retain 45% of your gp. We are waiting to see what retaliation happens to dealers like you who have upped the gp% first. And they will retaliate. Like I said many, many times before I am a new manager, new to GM, and no college ever. However, I am a professional. I've been to the fixed ops academy, and learned the NADA accounting guides for GM. I'm not going to keep putting this on here. GM does not want us using this formula. Our consultants are now loving the results. Simply put, you keep doing what you're doing. It's working for your dealer. 45% retention is awesome. I'd just be making them more money than you.