In my opinion, one of the most important times in a warranty repair order’s life is when it gets closed out and everything is set in stone.
For every 10 dealerships there are probably 12 different ways a warranty repair order may get closed out. In some dealerships, the warranty repair order is closed by the cashier when they get a hold of it or when the customer comes in to pick up their vehicle. In others you’ll find the service advisors coding and then closing out the repair order.
I feel these and most other ways aren’t the right way to do it because of the fallout that can happen from a closed warranty repair order that wasn’t coded or billed out properly in the first place.
Often the fallout or the problems that are created by closing out a warranty repair order are not considered. You’d be surprised what can happen and how much time and money it can cost you with one click of the keyboard or the mouse and we’re going to take a look at it.
Let’s start with the easy to detect problem first. It should be no surprise that a warranty repair order that isn’t looked over with an eye for detail has a much better chance of being flagged out incorrectly.
I know parts counterpeople, technicians and service advisors always think they have it right when parts are billed out, repairs are performed, labor is billed out, labor operations are picked out and everything was properly allocated to the right repair lines but mistakes happen all too frequently.
I’ve seen it all. Parts marked up incorrectly, the wrong labor operation assigned, labor hours were wrong (usually higher than it should have been), internal or customer pay parts are on the warranty line, parts that came from nowhere and other mysterious problems that create an incorrectly flagged warranty claim.
Occasionally you’ll come across one that never should have been a warranty claim at all.
If you have a system where the service advisor or the cashier is the one closing out that warranty repair order to accounting then someone has some big headaches ahead for them.
Eventually the warranty claim will get paid and hopefully the manufacturer will only be charged what it should pay but this is when the nightmare begins to rear its ugly head.
So that $950 warranty claim has paid all that it will for $890. What went wrong? Why is there a difference?
Just as the list shows previously in the article, different variations on parts and labor inconsistencies can create that $60 difference. The problem is now, you have to spend time investigating the claim to determine those differences and you have to get the information to the office so they can correct the warranty schedule. From there, the office has to make the necessary schedule adjustments to clear it from the schedule.
In some cases the office may just dump the adjustments into one lump sum somewhere and then it’s considered taken care of. Others will charge off the appropriate amounts to the department that should be shouldering the burden of the write off.
It doesn’t stop there. When warranty repair orders are billed incorrectly, there is another component of it that’s a real financial problem for your dealership.
Most pay plans in the service and parts department are based, in part or whole, on sales. Variations on that can be based on hours per RO or total gross profit or just about anything else you can think of. Technicians are getting paid by the hour and sometimes getting a bonus based on hours flagged. That means, if a warranty repair order is accidentally billed out with more labor or parts on it than should be there, someone is benefiting from it.
Now when you look at this one repair order for $950, you’ve already lost $60 based on incorrect pricing and now add on a few dollars more for the money paid out to the technician, parts department personnel, service advisor and service manager based on the inflated repair order total.
Don’t assume the difference is being recovered. Occasionally technicians will be charged back time if the time difference is significant enough but it is unlikely service advisors or parts personnel will take the same hit since their cut is smaller and a bit more difficult to calculate each and every time.
When it’s the case of one warranty repair order, it’s inconsequential. When you’re talking about dozens of times a month or hundreds or potentially a few thousand times a year, you’re starting to talk about a costly situation. Throw in the fact that you’re making far more work for the warranty administrator and the office staff, it’s costing the dealership a large amount time and money.
I find that when you have a warranty administrator that pays attention to details, they will find and eliminate most of these errors before it hits accounting and that saves you time and money that’s better spent on other more pressing issues.
So when it boils down to the question of who should close a warranty repair order, I feel it’s fairly simple. It should be the person responsible for verifying all the claim information before submission and then submits the claim. That in most cases is the warranty administrator.
Take a few minutes to ask the office manager if a lot of warranty schedule adjustments are being made. If that’s the case, ask the warranty administrator why it’s happening. You may be surprised to find that you’re one of the service departments out there that could use a change in the way you close out warranty repair orders.
