Posted on December 14, 2017 by Jill Delaney

The automotive industry is heavily regulated. Finance departments continually face sales, manufacturer and warranty audits periodically. As manufacturers look for more ways to increase revenue, audits will increase. According to The Center for Automotive Research (CAR), the average dealership spends close to $200,000 annually on overall regulatory compliance. Some of these charge backs could have been avoided if following documentation best practices.

Typically, 50 to 100 vehicle folders are reviewed during an audit, depending on the manufacturer. Preparation for these takes a great deal of time and also puts the dealership at expensive risk if not handled properly. Here are a few of our recommendations to best prepare for a warranty audit.

  1. Scan all related documentation for easy, online retrieval. Often auditors will come into your dealership with a list of VIN numbers for which they are requesting documentation. A missing document could cost the dealership an expensive charge back, so it is crucial to scan all documents including receipts, as auditors will often look for a difference between the warranty and standard. Using document scanning, you can quickly find the VINs through web-based software for a painless, smooth audit.
  2. Keep accurate and complete repair orders (ROs) online. By scanning and archiving your ROs online, dealership personnel, accountants and manufacturers can clearly see all the information needed without ever leaving their desks. Keeping records online allows you to maintain them for long periods of time without taking up valuable floor space. Scanning also eliminates the risk of an employee altering the information with white out, black out, erasers, etc.
  3. Consider using a consultant to review your dealership policies and procedures. Automotive consultants can help identify areas of concern prior to a warranty audit. Automotive consultants specialize in the industry and know the process from working with other dealerships. The consultant can also recommend record retention and parts retention best practices and how to document consistent with standards. They will customize internal auditing procedures for your specific dealership or dealer group.
  4. Designate an employee or vendor as your compliance officer. This person should regularly spot check claims to ensure all supporting information is in the system and perform mock audits by pulling random samples of warranty repair orders to ensure customer concern descriptions are clear and concise, bills fit the dates and times, and necessary signatures are included, etc. Performing self-audit reviews will most prepare the dealership for actual audits. When it is time for an actual audit, this designated compliance officer will handle the claims from beginning to end.
  5. Ensure all dealership employees understand the auditing process and internal procedures to follow for tracking warranty claims, the information that needs to be noted. Employees should make sure dates and mileage are recorded correctly. Service and parts employees may need properly trained on documenting hours and repair work. For example, if a technician requires additional labor hours, the service manager must authorize the repair and note the reason extra time was needed, sign and date. Documents of customer eligibility for incentives must also be documented to avoid being classified as fraud by the manufacturer. One employee not following the process could potentially cost the dealership thousands of dollars.
  6. Maintain proper documentation of customer service files.
    Auditors may be looking for a variety of customer service files including work orders, warranty claims, parts documentation, invoices, service technician time sheets and any other documentation related to vehicle repairs. Scan all of these document types to ensure a simple data transfer.

Following these 6 tips will help you avoid expensive charge backs, decrease the time spent on preparation and improve your overall auditing experience. To learn more about digital document scanning and archiving for your dealership, contact us to see a demo at 317.915.9039.