It’s time again for the end-of-year clean up. This clean up is a must to get all the dealership accounts up-to-date and take advantage of tax write-offs. Not only are warranty receivables important, there are a few other end of year warranty procedures that need to be taken care of.
The most important issue to take care of for service departments is the write-offs for the warranty receivable schedule(s). Even though we feel you should do this chore on a weekly to monthly basis, most
dealerships let it slide until the end of the year.
Only write-off claims that have no chance whatsoever of getting paid. If it’s still possible to get a claim paid, leave it on the schedule. Often times when a claim is written off the schedule, it goes out of everyone’s mind. As soon as it’s out of everyone’s mind so goes the chances of getting that claim paid. With the claim
still on the schedule, you will have your weekly or monthly reminder of it.
The best way to keep track of claims that are written off is the use of our Warranty Schedule Adjustment form that we’ve got posted on the web site at www.dealerinsight.com. Look for the Forms area to find it. Make notes detailing the reason the claim is being written off and where the burden of the claim write-off should be placed.
If there is an error in pricing parts or the labor billed, the appropriate department should be charged back for their error. All write-offs should not be dumped into one account that the service department ends up paying.
If there are other unusual circumstances that caused a claim to not pay or pay short, the department (sales, service, body shop or parts) that was responsible for the problem should pay for the write-off. For example, if a service advisor neglected to check the manufacturer’s computer system for a vehicle and there was a block on the vehicle for warranty repairs because it was scrapped or had modifications to it that voided the warranty coverage, the service department should pay for the whole claim out of their pocket.
If the sales department made a mistake reporting the delivery properly and because of it, you can’t get the claim paid, the sales department should be paying for it. You get the idea. Let the department responsible for making the mistake pay for the unpaid claim.
Anytime you’re dealing with the warranty schedule, check to see if there is more than one schedule being utilized. There are still some dealerships using multiple schedules when only one is necessary (this happens at GM dealerships). You may also find PDIs and service contract claims on their own separate schedules.
Next is a review of the Open RO list. It surprises me how often the Open RO list is overlooked when it’s time to clean up old paper. When warranty administration is scrutinized, there tends to be a narrow focus on the warranty schedule. But the warranty schedule is only one place to look for claims that have gone astray.
Run the Open RO list so you see all open repair orders. I’ve seen them run with just warranty listed and you won’t get them all by running it that way. You’ll run into situations where a repair line was incorrectly tagged as customer pay or internal or worse yet, unassigned.
With a good list to work with, work through every single repair order. Your main focus is to look for open warranty claims but no doubt you’ll find some other interesting repair orders along the way. Keep notes on anything you want to go back and look into further, close out any no charge repair orders that have been
overlooked and underline, circle or highlight any and all warranty claims. You’ll go back, track down each and every claim and get them on their way to getting paid.
Next is a review of warranty, service contract and conversion van company labor times. Verify that you’re getting an increase in labor rate at least once a year. If you don’t, you are not staying competitive.
You want to want to keep your labor rate for service contract and conversion van companies on par with your factory warranty labor rate. It is necessary to send the service contract and conversion van companies a copy of the last warranty labor rate increase letter you received from the factory and request an immediate
increase in the labor rate you are receiving to match what the factory is paying. The letter should be addressed to the person in charge of labor rate increases to speed along the process and so you don’t get the run around about sending it to the wrong person.
Finally, make a New Year’s resolution to make warranty compliance a high priority. In the tough times that are coming manufacturers know that warranty audits can be a cash cow. By straightening things out now you can keep the warranty auditor from taking too much money from you or even avoid the visit.
