Taking discount upfront or no

[B964]

In my dealer group they take any discounts upfront and cost in inventory is the standard net cost. On bulk purchases some of these discounts are substantial money.
I can see the surface advantage of that to the owner. Other than not realizing the GP in department sales and/or being able to offer a more competitive price to customer what other disadvantages are there?
Higher cost of inventory on hand at tax time?
Higher cost of having an outside inventory done if based on inventory value?
If Part persons are paid on a GP % etc.
Having higher GP % in parts is better for the dealership (fixed absorption?).

Thoughts?

[olepartsguy]

687 BABY. TAKE THE DISCOUNT NOW WHEN YOU CAN GET IT. IT GOES RIGHT TO PARTS PROFIT EVERY MONTH.

[B964]

Right. But that is not how they want it done here.

[CADLOU]

Frankly, it not favorable to you if you are paid on gross. I be having a talk about that.

[B964]

I am not paid that way. Looking for reasons it is not good for the dealer in general to do it that way.

If I recall from previous training dealers parts profit is part of equation by manufacture for level of success that leads to other benefits that would be greater than taking the discount upfront.

[TimK]

687 BABY. TAKE THE DISCOUNT NOW WHEN YOU CAN GET IT. IT GOES RIGHT TO PARTS PROFIT EVERY MONTH.

This is the way to do it.

Where would the money go if it doesn't go into 687?

Are you lowering the cost of the part that was purchased with a substantial discount to below cost?

[smoyer]

You have a short minded owner who only cares about the front end if he wants you to do it that way when in reality the fixed operations carry the dealership

[B964]

You have a short minded owner who only cares about the front end if he wants you to do it that way when in reality the fixed operations carry the dealership

That may be the case but in effort to change things that may not be the best argument to use.

looking for arguments that show the positive of doing it the other way. Best info I can gather is it does not go to a 687 type account.
Any question here relating to how accounting is done gets a reaction like you are asking for missile launch codes.

[Denise Trimble]

That may be the case but in effort to change things that may not be the best argument to use.

looking for arguments that show the positive of doing it the other way. Best info I can gather is it does not go to a 687 type account.
Any question here relating to how accounting is done gets a reaction like you are asking for missile launch codes.[/quote]

My input to them has always been this:
"The Parts Department carries your only true asset. You pay for these parts every single day. You can floor plan any car on this lot, lease equipment, rent buildings and sell labor. You will still own these parts when you get down to where profit margins matter most. It takes maybe less than ten c/p repair orders to equal (or do better than) the GP earned on one vehicle sale. Given that part sales are split with Service; we STILL are a profitable business segment of your franchise. Account 687 is crucial to that profit margin for everyone."

[olepartsguy]

HERE IS WHAT HAPPENS IF YOU ARE A GM DEALER. IF YOU PUT YOUR PARTS BELOW DEALER COST ON A REPAIR ORDER , THEN THE PART DOES NOT COUNT AS A GM PARTS SALE. IT BECOMES A "UNRECOGNIIZED PART". YOU CAN GO ABOVE DEALER COST, BUT YOU CANT GO BELOW COST.

TO CLARIFY 687 IS FOR GM WAREHOUSE PURCHASES AND 688 IS FOR "OTHER PURCHASES" WD, INTERNET PURCHASES, ETC