Founder and CEO,
Inc., and ExpenseEdge
The Dealership Challenges
95% of dealerships in the U.S. are decentralized, meaning there is no formalized Purchasing Department to manage the dealership purchasing and contracting activities across the organization. Since purchasing and contracting activities go on every day, if not controlled in some manner, they present a set of significant challenges, including the following:
Necessary Controls – Tools in an Organization
Controls are present in every organization to prevent surprises and ensure performance and compliance. Most departments have various controls present, but oddly enough, in the spend management or purchasing space, where the commitment of company funds occurs, policies are often unwritten or non-existent.
Suggested Next Steps to Control Risk – Reduce Costs
Leaders in the organization should take steps to mitigate
risk by implementing purchasing policies and managing supplier contracts and
1. Implement Purchasing Policies – Approval Authority
Purchasing policies are essential guidelines for those in your organization who commit company funds, bring suppliers in, approve invoices, and process supplier payments. Effective policies will outline who has the authority to perform specific roles and who does not. The most effective tool I have seen and witnessed in my career to control the commitment of company funds is the approval authority matrix. There are three ways to spend money in any organization to commit company funds: a purchase order, a contract, or an invoice approval. The best way to control those expenditures is to implement the following:
Example – Approval Authority Matrix
Fixed Operations Director
2. Implement a Manual Contract Tracker
3. Secure a Digital Contract Tracker
- Contract Tracker Data Capture
Phone & Email
Most dealerships have decentralized purchasing structures and lack purchasing policies(approval matrix) and a method to track contracts and pricing agreements. If these are not in place, you face risks from several fronts, including automatic contract renewals, automated or scheduled price increases, unknown price increases, fraud, and more.
You can mitigate those risks by implementing purchasing policies and either a manual method of managing contracts and pricing agreements or utilizing a digital solution to manage those important documents. The commitment of company funds is limited to three tools: contracts, purchase orders, and invoice approvals. Once your methods are defined and controlled, and you properly manage corresponding documents, your risk and likelihood of surprises will diminish significantly.
If you would like to receive an outline of a contract
tracker that you can build out, email firstname.lastname@example.org, and I will be happy to send you that tool.
Doug Austin is the founder and CEO of StrategicSource, Inc.
and ExpenseEdge, a provider of spend management services. Doug, a veteran of the U.S. Marine Corps and a graduate of the University
of St. Thomas, is a trainer, speaker, consultant, and business owner. Doug has acquired over 40 years of line, staff, and executive experience
in spend management and supply chain management in various vertical markets.