Inventory issues.

[PeterParts]

Silver bullet - you could have some partial warranty charge backs for parts pricing changes re some mid month price changes GM made.

[Strap22]

The price tape can play a part this shortage or overage. Depending on which manufacture and which DMS system you are on. Inventory variences have been on the rise the last few years and some of the issues we have found are:
1.)In the Cashiering screen they apply a discount by charging to your cost of sale account instead of the sale account. (This is not the correct place to apply a discount anyway)

2.) Journal entries in accounting for car deals that didn't have the proper amount setup in it for Due Bills being charged back against inventory.

3.)_This is the one that really scares me. The Manufacture only supplies (in our case) the DMS system with one price tape per month. That means we only update once a month. Then the manufacture tells us they get daily updates and prices change everyday. They say they need to do that so they bill us for the correct cost of the parts. The problem is we are still on the old price until the next month, so we can go up to 30 days with the wrong price on a part. This only effects parts that are sold during this time. The APP/DPP will adjust the instock items the next month. So basically you have a part for example that you show in your DMS system that cost a $100.00 and sells for $167. They get a new price on their system and bill you at the newest price which is now $1.25 cost. When you sell this part you are selling below actual cost and under releiving the GL. If this is a fast moving part you could be building a spread between your pad inventory and the GL. I am told that ReyRey is addressing this but ADP does not have this fixed. I was also told that it only effect Toyota but I would like to have someone verify that.

4.) The other issue I have just discovered on ADP is if you bill a core on a ticket and then detail that core the cost of the core falls off and does not releive the GL when it closes. If you do not detil the core it will releive properly. This is a document cse at ADP and it affects anyone that bills core.

On ADP use the PHR #7 inventory value instead of the MGR inventory value. These two do not always match and ADP does not know why. They may match 99 out of a hundred time butit never fails when there is a descrepancy and this is check it always shows a varience.

As for losing your job for a shortage I agree if the pad numbers look good (in & out) and you have no other reason to suspect theft and the dollar difference doesn't match, I would look in accounting, or mapping on RO's not being setup correctly, discounts being misapplied, journal entries. I would not be looking at the PM at this point. Mike hit this on the head with the reference to "integrity". You either have it or you don't. If you can prove your side make them prove theirs. Beleive me accounting makes their share of mistakes. If they didn't they never would have need to make journal entries.

Other than these items I agree that doing perpetual inventories daily is a must and coding and the PM signing each and every invoice that will be posted in accounting to the GL so when these descrepancies happen it is much easier to see if they were misposted or miscoded. I have seen both but the main thing is to identify the problem so that it can be addressed.

[sallen1]

I hear you on this. The price updates and cores seem to be the source of our inaccuracy.

Our annual inventory at Store #1 was $159.00 off in physical counts out of $369K inventory value (darn close).

The books show a $15K overage. Where did that come from? We book the app/dep every month.

The only explanation were the increase in core values for batteries (about $2000 total) and the rest from the way the price increases hit the books with respect to parts orders received the same day. We run the tape before business opens and receive the previous day's orders later in the morning. Those parts are billed at the old price but received at the new. Is this $1000 a month? We will be tracking that from now on and I'll let you know.

Without a exhaustive audit, that's the best I can find. Obviously, if we were $15k short, we'd do the audit!

s

[STRAUBMAN]

We did our mini audit of 3 months. We found a lot of small billing errors. My counter guys not costing non o.e. parts out correctly. We average about 40k in manually entered parts a month. This leaves lots of room for error.
Next we found the big one!!! We apparently return a lot of used parts that the Body Shop refuses to use. The parts are taken off the RO and returned. We usually put oe parts on then. PROBLEM. And this is absolutely my fault... My counter guys don't tell me or keep track of the returns. The credits, if we actually get them are usually mailed with the monthly statement. The office person posting them has been putting this amount into 67E (Body Shop Policy account). No one has coded or signed off on these. We haven't put a pen to it yet but it looks like several thousand dollars. Good for the Body Shop bad for me. Another meeting Tuesday.

[newbie]

I think some overlook at how you can get an overage outside of booking errors on the accounting side.

How many dealerships get extra parts in their shipment and "forget" to file an overage claim but will adjust their inventory up 1? The cost of that part would be showing up on the parts side but not accounting and you'd get an overage there.

Some vehicle require 4.5qts of oil and you can only bill out 1 qt increments...that .5 adds up over the year.

I can think of dozens of things that can add up to a hefty overage but it's up to an honest parts manager wanting to book the overage that month and not wait till inventory time to get that extra gross.

[gunner]

Wasn't wanting to say much. Just had a problem here. Showing on hands and nothing on the shelf. Turns out a service writer has been removing parts from RO's. Seems his answer to customer complaints of high prices was to remove parts from the RO. Of course he didn't touch labor $. He also "fixed" some of his families cars on the cheap over the past year. He went out in silver bracelets last tuesday.

[jdub49]

No one has yet asked about how you are doing youe reconciliation. I'm not inferring that you don't know how, but rather just affirming that ALL your plus adjustments, such as core returns not yet credited, obsol returns, damage claims and invoiced not received have been taken into consideration.

Also, in another life before I knew how to actually run a parts dept, I got into deep doo-doo by not accounting for the variance in emergeny purchases.

Check your account setups to ensure that there aren't any cost of sales accounts that are mis-directed. I recall while checking the RSA setup in the service login of one dealership I worked for, I found a cost of sales account not assigned to relieve the parts inventorybut rather relieving shop supplies.

Is your sublet account in balance? Are you GOG accounts in balance?

20K sounds like a large number, but it breaks down to less than $80 per day in errors.

I hope whatever the problem is, it shows up and causes you no personal discomfort. Good luck...

[Mike Nicholes]

jdub49: A most candid and frank observation and contribution. Thank you... well said.

Mike Nicholes

[hotuna]

I will give you one sugestion, but everyone else here also have the right ideas too.
Start a spead sheet of al your purchases,factory on one outside venders on another.You can customize these what ever way you likr but make sure that you have PO#'s invoice#'s were they're charged out or for stock(on your outside). Now you can compaare to your mrg report your purchase's and when your checking these purchases youcan check the RO's to which their charged and that the proper costs were used.
The next thing is that nothing gets posted to your inventory account with out checking it and signing off on the invoice.
I did this with two different stores that had some what the same problems, and between the office and the counter guys the problem stoped.
Hope this is a help

[ICEMAN]

If it's a large amount, it's almost always in accounting. Your store may be doing everthing correctly, but whenever personnel changes, you need to re-check several things. Here's some examples:

1) new warranty clerk
---> core returns on parts sent back for warranty parts testing (core value doesn't get posted back to parts)
---> warranty claim write-offs

2) new counterperson
---> accounting on outside purchases

3) new accounts payable person (this is where I cringe)
---> oil purchases (acct 2420 or 2440)
franchise parts accounts are used an open account for all sorts of things : sales brochures, required shop tools, etc.
---> Any "mailed" invoices
---> Accessories added by sales dept.