Why staying ahead of budget predictions is more critical for OEMs and dealers than ever
Top-performing dealers have one thing in common — they produce an annual budget and use comprehensive, rolling forecasts to make crucial business decisions throughout the year.?
Unfortunately, many dealerships create the budget once but then don't maintain monthly forecasts as the financial year unfolds. As a result, the ‘Budget’ becomes their 'financial operating statement' for the forthcoming year. In contrast, those who use their budget to create regular forecasts to plan their profits are in the best place to exceed business performance.??
As a result, the 'Budget' becomes their 'financial operating statement' for the forthcoming year. In contrast, those who use their budget to create regular forecasts to plan their profits are in the best place to exceed business performance.?
Monthly forecasting enables dealers to manage the impact of the current business/trading conditions against the budget, supporting them in making crucial business decisions interactively with what is happening in the market.
Over the last couple of years, dealerships have enjoyed a period of record profitability, primarily driven by new vehicle supply shortages, leading to a healthy profit margin in new and used cars. However, predictions reveal that the second half of 2022 could see a drop in used car sales as sourcing and stocking good-quality vehicles becomes harder for dealers. As new car supply generates stock for the used car market, used car supply will likely be affected in the future, which continues to be uncertain.
In addition, the cost-of-living crisis and record high fuel costs are adding pressure to the already challenging market conditions suffering from the shortage of new and used car supply.?
In such a volatile market, it is now more crucial than ever for dealers to understand where they are to optimise performance and reduce costs. Equally, OEMs need to clearly understand their network's performance to validate each dealership's viability and track and understand industry trends to deliver what customers require.?
Forecasting regularly enables dealers to compare actuals versus budget across all departments, including new and used cars, parts, and services, and use the data to take corrective actions, which can help them achieve their objectives and increase profitability.?
On the other hand, it provides car manufacturers with a more precise picture of their network to assess new car and parts sales volume and dealerships' vulnerabilities, allowing them to react to market changes and drive progress more swiftly.
What are the main benefits of regular forecasting for car dealerships?
Improving decision-making and reacting swiftly to market changes
For dealers to be more proactive and effective in their sales process, it's fundamental that they know how well each revenue stream is performing. For example, more used car sales often lead to more F&Is, aftersales, and parts sales.?
Predicting customers' needs at the right time
Customer needs and market conditions drive most businesses. A rolling monthly forecast allows dealers to anticipate what their customers require by looking at past purchase patterns and current market trends. With a robust customer touch point strategy, dealers can understand and predict their customers' requirements through the ownership lifecycle, generating sales opportunities to sell the right products, to the right customers, at the right time.
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Mitigating risks
Forecast projections can also help dealers control their profit margins throughout the year. A regular forecast can help dealers adjust their trading policies to adapt to market conditions in scenarios where actual sales differ from the original budget. In addition, forecasting supports dealers in understanding how fluctuations in operational performance will impact the business's short and mid-term trading status.
At APD, we believe that increasing efficiencies to drive profitability should be at the top of all organisations' agenda, as navigating the challenges of the automotive sector are critical in today's market. Hence, we emphasize the importance of effective budgeting, forecasting, and planning for accelerating business performance and driving profitability.?
"Increasing efficiencies to drive profitability should be at the top of all organisations' agenda, as navigating the challenges of the automotive sector are critical in today's market."
“Increasing efficiencies to drive profitability should be at the top of all organisations’ agenda, as navigating the challenges of the automotive sector are critical in today’s market.”
Our latest budgeting and forecasting software system, ProfitPlanner+, has been engineered to support dealers to plan effectively for their business and give OEMs complete visibility of the performance and profitability of their dealer network.?
A highly intuitive budgeting and forecasting solution, ProfitPlanner+ uses the latest Microsoft Azure cloud technology to integrate and streamline data between OEMs and dealer networks, providing clear and concise reporting. With ProfitPlanner+, dealers can automate the budgeting and forecasting to generate budget versus actual performance comparisons as frequently as needed.?
Being available worldwide means global organisations can gain an accurate overview of each market, region, and dealer's budget projections and measure performance more efficiently across an international network.
---About the author??
John Waring?became CEO of APD after its acquisition in 2018. He has invested his working career in IT, using technology for business advancement and transformational change. He has ambitious plans for APD and sees a unique opportunity to position the company as an industry leader in applying new technologies to improve processes, drive change and optimise business performance across multiple international markets.
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APD Business Management Ltd provides business management performance solutions for the international automotive industry. These solutions include an Education & Training Academy, training, mentoring, custom education, and business management consultancy, consisting of performance analysis and the creation of SMART improvement action plans, audit services, and structure business reviews. The firm uses advanced technology, data insights, and best-practice business management know-how to evaluate performance, identify growth opportunities and improve efficiencies between OEMs and their dealer network.
Those in the automotive industry or other sectors wanting to perform more effectively to maximise profitability can learn more about APD and its services on apd-group.com or follow them on LinkedIn.