When times get tough, scam artists work overtime to take your money. Dealers are seeing an upswing in false and inflated billing.
Your general office handles two types of payables – recurring and non-recurring. Each type requires policies to protect the dealership.
Recurring Charges
We have written numerous times about the need to have a dealership contracting policy for suppliers. These are some critical requirements of any dealership supplier policy:
- All requests to enter contracts with suppliers should be directed to senior management;
- Individual department managers and staff should not have the authority to sign contracts;
- Only senior managers should sign contracts;
- Senior management should do a cost/benefit analysis for every contract;
- Senior managers should understand the terms and conditions of the contracts that they sign;
- There must be standards to prevent the company from entering long term and automatically renewable contracts unless absolutely necessary;
- No monthly payables should be set up without senior management approval based on a signed agreement; and
- The contracting policy should be regularly communicated to department heads and other staff.
If you have such a policy in place, then you are more likely to enter contracts that benefit your company without unduly burdening it. However, you must then regularly ask if you are getting your money’s worth. When you sign agreements that provide for fixed regular monthly payments, it’s generally easy to check that the supplier is providing what was promised. However, where a contract’s monthly payment is based on the units of product or service delivered, then you must be much more careful. How do you know whether you are getting what you are billed for, for example, by a lead generator that charges you by the lead or a company that supplies uniforms, rags and walk off mats?
The general office should require dealership employees in charge of performance under the agreements to review bills monthly to be sure that the dealership is getting what it is entitled to. The approval that is sent to the office should include not only a sign off by the person who reviewed the matter, but documentation showing that the review took place.
Non-Recurring Charges
An invoice arrives at your dealership. Does your office simply pay it? Does your office route it to a manager who really doesn’t review it but just signs off to approve the payment? Non-recurring payments may be difficult to track, but there are things that can be done.
- Use a purchase order system. No non-recurring payments should be authorized without a purchase order. By this method, you will know that someone made the decision to buy the product or service.
- Have the bills reviewed by a manager. Yes, the manager may have decided to purchase a product and issued a purchase order. However, did the dealership get what was ordered? Is the amount you were charged correct? The manager should check to be sure.
- Require proof of receipt with manager approval. Take the steps necessary to ensure that you have proof of receipt of the products or services for which you have been billed. Require packing slips, bills of lading, advertising cuts, etc. as support for non-recurring payables.
General Precautions
Regardless of whether you are dealing with a recurring or non-recurring payable, there are precautions that should be in place.
- Know more about your vendors. Do you have full contact information for a new vendor, or are you just sending payments to a P.O. box? When setting up payments for new vendors, you should take some simple precautions to be sure they are listed in the phone book, or get references from others who have done business, or run an industry report about the supplier.
- Even when you have policies in place, sometimes even the reviewers must be reviewed. You should have a practice of regularly reviewing the performance of general office staff dealing with payables to be sure that they are requiring compliance with your policies. Employees respect what you inspect.