Developing and maintaining sufficient cash on hand during an economic slump is critical to keeping your dealership healthy. When revenue is lower than expected, leading dealerships balance revenue growth efforts with exploring and implementing cash conservation methods.

Here are seven tips for conserving cash shared within an MRAA Ask the Expert webinar with Pat Kennedy of Spader Business Management (now NCM Associates) a few years back that continue to be relevant today. On your quest for maximum financial health, consider implementing these strategies to help stabilize and sustain your business.

1. Take control of the Purchase Order book – In good times, bad habits can happen. One of those habits is allowing a large number of team members to make buying decisions. If your business is getting tight, it’s time for owners, principals and key decision-makers to take the reins of the PO book again. Having too many people responsible for purchasing can cost you money and lead to inventory surpluses. You need to understand your current balance of parts and accessories and be able to turn old inventory rather than leaving money on your shelves. Rule of thumb: Look for dust and think of your inventory as currency on the shelf, not hard parts!  
2. Do a line-item analysis of your expenses – Print a detailed general ledger report for your entire dealership. Now is the time to go through every expense by each line item. Ask why. Dig deeper to find cost savings by eliminating things that have not moved the needle!
3. Negotiate with business partners – Contact trusted sources for term extensions and available trade discounts. Keep the mindset that this is a partnership you’ll want to continue to have down the road, so maintain your bridges. Don’t burn them. It’s about collaboration and continuing your relationship for years to come.
4. Review your advertising and marketing spend – Of course, it’s time to innovate, but you can’t afford to speculate these days. If you’ve been doing things because it felt right, it’s time to dig deeper into your results and costs to determine your ROI. Find an expert to help you if your team cannot figure it out. Assign your GM or managers to investigate your website’s lead generations and follow-up times. Closely monitoring leads can create accountability and improve processes.
5. Establish internal guidelines around used inventory acquisition – To manage cash and any used inventory, you need to know where you are currently! Establish your predetermined limitations for successful negotiations with customers to avoid creating a cash hole.
6. Expense control scavenger hunt – Gather your team and departments to generate cost-saving ideas. Break them into smaller teams and have them brainstorm ways to conserve cash. You can add incentives like lottery tickets or a free lunch for the winning team. This welcomes the team into this strategic process. It also reduces the stress on frontline employees who want to feel that they can contribute to helping the company through challenging times.
7. Right size! – This means finding the right balance between your team’s ability to generate revenue and your need to cut costs, which is different in every region for every business. Remember that the revenue builders within your workforce are key to the performance of your business. Your administrative costs are paid for by your frontline employees! It is critical to keep productive people onboard to generate the income you need to cover your overhead costs. Simply changing roles can sometimes help create the outcome you desire. Review the business structure weekly.

Your dealership is in this for the long haul! By being diligent about tracking and caring for your dealership’s health, you can navigate economic uncertainties with confidence. Capitalizing on your growth opportunities while carefully managing your cash and mitigating your risks will help you ease financial tension.

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