Expense Control

Subscription creep at home 0:00

Steve Shaw: Dave Rogers, welcome, welcome, welcome. What's happening? What's on your mind tonight?

Dave Rogers: Hey, lots of things, Steve. Tons of stuff on my mind. How the hell are you doing? Let's get some of the niceties out of the way. How you doing, Steve?

Steve Shaw: Man, I'm doing awesome. I am having the best day of my life. That's what I'm going to start saying from now on: having the best day of my life.

Dave Rogers: What's on my mind? I don't know. The other day you mentioned expense control, and you seemed pretty heated about that whole topic, or excited. I couldn't tell which one you were.

Steve Shaw: Well, you never know. It's exciting as well as frustrating when it comes to expense control. But I'll tell you a story about my life and expense control. I was just dinking around in the five minutes I had between classes the other day, and I saw this silly app. It was called Subpilot. No sponsorship or anything, it just happened to be called Subpilot. I know there's Rocket Money, and there are some other ones out there. But I clicked on it.

And it said, "Hey, I can save you 1,200 bucks just by using my app. We can research all of your subscriptions, all of your memberships and so on." So I clicked on it, and initially it was blah, blah, blah, "You've got to pay me 20 bucks to get to the good stuff." Against my better judgment I said, fine, it's 20 bucks, and they said they could save me 1,200. So I paid the 20 bucks.

It took a while, but it came up with this list that was pages long of things that I spent. I hooked it up to my account and so on. The cool thing was I was able to get the app to delete a handful of subscriptions. I had OpenAI, I had a Ninja AI, I had two or three of these AI subscriptions that I probably signed up for to test them out, and they went past the trial. Normally I'm pretty good about it. So the app was able to get my money back on some of those.

But then it listed all of these things. I didn't know that I had two Amazon accounts. I've got two Prime accounts. I've got a couple of Audible accounts. I've got all these things through my Amazon under a couple of different email addresses. So I started going through and deleting everything. Now, this is a tedious process. I go through all the easy ones: delete, delete, delete, cancel, cancel, cancel. Then there were some other ones. It turns out I had an American Airlines internet account for Wi-Fi, and I've had that for like 12 years, 50 bucks a month. And I'm thinking, gee, that's a lot of money. So I just start checking the boxes, going down and going down.

If they got to a certain point, I would put the hard ones aside, and I got everything I could. Long story short, this whole entire weekend, two days, all I did was save myself money. I was so mad, because I can't believe I was spending 200, 300 dollars a month that went away. It was probably a couple of grand that I ended up saving myself annually. I got some refunds and so on.

So yes, it sort of pissed me off. I was irritated because I spent all this money, but I was also excited because I found all these silly subscriptions and I canceled them. I ended up going through line by line on every credit card I have and all through my bank accounts, and I got everything deleted for the most part. And the last couple of days I was like, nope, not signing up. I was really good at not going back at it.

But it got me thinking about my days in the car dealership world, and you made a comment the other day as well. You said, "I'm better with my dealer's money than I am with my own." So I got to thinking about expenses and expense control. I think there are certain people in the world who are amazing with it. But I think a lot of people don't even think about expense control and watching all these things we sign up for that end up costing our dealership or our department money. So I thought it would be a great idea to chat about that. What do you think?

The creeps on the expense lines 4:32

Dave Rogers: No, I think it's a great subject. I think we both went through the AtCon training years ago with the seven controllables, and you looked at the expenses. I guess the term they used to use was "the creeps." Your uniform bill, all of a sudden you've got floor mats on it, you've got rags on it, and what used to be a hundred-dollar bill a week is now a two-hundred-dollar bill a week. You just don't notice it. Part of the problem is you just get caught up in the muckety-muck sometimes, and you don't spend the necessary time to sit there and look at these things. You can see that with anything. It takes discipline.

You're not an idiot. I would say that Steve's not an idiot. But you sit there and kick yourself in the ass afterwards: what the hell was I paying for, and how long was I doing this? And it's the same thing at work. We do it every once in a while with some of the stores, look at some of the expenses, and you're like, wait a second, what is that? And you find out that two GMs ago somebody signed up for something, and the controller was just paying it. It was on the Amex.

That's one of the worst, the automatic payment things. I hate that. You put it on the Amex card, nobody looks at it, the thing just gets paid every month, and all they're doing is reconciling the card. They're not reconciling the expenses. That's how subscriptions get you too.

Steve Shaw: That's exactly it. For our service, I do my best to do an annual subscription just because of that. Sometimes dealers get into their expense control phase, or somebody new comes in, or an outside service comes in and says, "Who's this $300?" and then they whack me off the expense line. I've had dealers say to me as well, "I don't want a monthly. I don't want that recurring. I don't want that creep." So we do an annual arrangement. And then there are a handful of guys where I worry about it every month: are they going to pay? The credit card comes through, and the next day I'm waiting for that email that says, "I want to cancel." It is weird.

Respectfully, I'm glad people are paying attention to their expenses, and I think it's a great topic to discuss. How do you guys do it? Do you do anything on a regular basis for expense control? I have some thoughts as well, but go ahead.

Contracts, auto-renewals and weekly reviews 7:06

Dave Rogers: Our main thing is we leave things to the store. The GMs are free to run their stores. At the management company, we get involved with contracts. They can't sign anything but a month-to-month contract. Everything else has to be reviewed by us. We try to make sure the language is right, so there are no renewal clauses and so on.

How many times have you seen somebody sign a contract like that? A uniform contract came through not too long ago, and they sent it to one of my service managers. It was 60 months with 5% increases annually, and the auto-renewal was for another 60 months. Can you imagine that? I was like, no, no, no. We don't do 60 months, and we don't do auto-renewals. As a matter of fact, we don't do increases during the term of the agreement. Three years, there are no increases. Take it or leave it. I'll go find another company, because somebody will do it.

Then we have some stores that are struggling or challenged, and we have weekly managers' meetings at those stores. One of the discussions always revolves around expenses, especially if the store's not making money or not making enough money. We just keep grinding at it. It's funny, every time you get together you see something new: what's that? Why am I paying for this? You have to be disciplined. When you turn your back on it, it just goes away from you.

Six vendors sending toilet paper 8:42

Steve Shaw: You know, it's funny. I took over an auto group when I was young as a fixed ops director. I'm not going to mention the name of the company, because I particularly don't like them. Five stores: we had a truck store, a Ford store, a Chrysler store, Mazda, Hino, a lot of stuff. I've gone through the expenses, and I'm seeing this list of vendors providing us toilet paper.

We probably had, no joke, six or seven vendors providing us toilet paper. So I'm in my office canceling contracts, calling people: stop sending us TP. Well, my truck manager calls me up one day and says, "Hey Steve, we're out of toilet paper here at the truck store." And I'm like, "Kevin, guess what? Just wait around for a little bit, because I'm sure another shop supply company is going to show up." And sure enough, later that afternoon, toilet paper showed up at the dealership.

Who did that? Sometimes it's so hard to get your hands around it. Crazy stuff. How did we have five or six vendors sending us toilet paper? It's just nuts.

Shop supply fees and who waives them 9:55

Dave Rogers: It's usually a change of people. The other thing that drives me nuts on that same subject: in Pennsylvania, we can't charge a flat fee for shop supplies, so we have to itemize what we do. And we have state inspections. Inspection stickers are an expense. They cost us money. We charge for those now. When I first got with the group, they didn't charge for them. They ate them.

But every year motor vehicles raised the price of these stickers by a dollar, every year. So you have that, you have your wheel weights, you have tire tax, your disposal fees and so on, and we can charge that stuff in PA. What always amazes me is when I see service advisors overriding it. When you look at shop supplies, I think in NCM and with most manufacturers, most brands, the shop supply expense account is now a credit in the best of the best benchmarks. It's a credit. It varies how you do things, and there are tricks of the trade on accruing or prepaid, whatever.

In Pennsylvania we put those stickers in supplies, and then we try to offset it against the expense. My point is, it drives me crazy when I see people waiving it. Like the service manager who's paid off net profit in the store, and he's letting his advisors override all these fee codes we put in the system to lower his expenses. That's even more criminal to me. You have a way of recouping some of this, and we don't recoup it.

Steve Shaw: Well, I'm not going to go into my real thoughts on shop supplies, because as a consumer and as a trainer, I hate it, actually. I know it's a way for dealers to recoup money, but from a training perspective, an advisor perspective and as a customer, when I see that shop supply fee on there, it drives me absolutely insane.

Dave Rogers: Do you? Well, my Jersey store and my Delaware stores can put that fee on the repair order. Now, the law is you have to have a sign at your desk explaining what could be in it. It's a percentage of the labor on the repair order, and it usually doesn't exceed 25 or 35 dollars. In PA we have to itemize stuff. So I can charge you for the wire ties. I can charge you for the butt connectors. That's all I can charge you for. I can't charge the flat thing.

Steve Shaw: Yeah. I forget who I was talking to recently, but they said it's like five dollars a ticket. And I'm like, OK, strategically, from a pricing strategy, I can always live with a little bit. But when you said 25, 30 bucks, I know stores that are up to fifty dollars, and I want to know, what are you doing? From a consumer perspective, that absolutely drives me insane. I've done the math in a lot of these stores where it would take a $10 effective labor rate increase or more to offset that money, if you look at the repair hours and how many flat rate hours you'd have to get to offset that income. So keeping it to a minimum would be OK, I guess.

And again, it's easy for me to say things from an outside service, and I get that we all have to make a living. But it just drives me crazy from a consumer perspective. If you have a sign up there, that's fine too. But if the customer asks, "What's the shop supplies?" and the advisor has no idea, the customer walks away pissed off. And that's when the service manager ends up waiving the fee. Well, my advisor can't explain it, so I'm just going to write it off.

Dave Rogers: No, I agree. Again, it's part of the solution, and I've always been reasonable about it. I've never been a slob or a hog, or whatever you want to call it, when it comes to this stuff. You're just trying to lessen the expense, because you know what the other option is: you raise your labor rate, or you raise your parts prices. I got shot more for brake jobs and alignments, and in the old days tune-ups, than I ever did for a shop supply. And the other part of it is, I don't want to be like AT&T or the cell phone companies with all the itemized charges, or you stay in a hotel and you've got all these extra fees.

Steve Shaw: Rental car tax.

Dave Rogers: Yeah. During COVID it was funny. We had to buy all this PPE, with the masks and the gloves and stairwell covers and all that stuff. We saw invoices from stores out there that listed all of these items, because again, in PA you can't just put a fee on there. They put on there four sets of gloves, stairwell cover, seat cover.

And listen, it did throw up the expenses. It really did boost them. But that was a decision we looked at. We didn't do much charging on that stuff. We just looked at it as a necessary evil, because if we wanted to open our doors, we had to do the dog and pony show and spray the inside of the car. You're buying these bottles to disinfect and whatever. You talk about expense control. That was nuts.

Thursday afternoon asset meetings 15:29

Steve Shaw: Well, there are two things I hate, and we could do a whole section on the other one. Shop supplies is one of the things I hate, and the other one is the diagnostic charge. That needs to be its own podcast. But it's funny, that particular group I was working at that I did not like, and I won't say their name, did one thing that was pretty awesome. If you ever worked for this company, you'll know: we had Thursday afternoon asset meetings.

Every Thursday it was the service managers and the fixed ops director. We had five stores, so all my managers came in, me, the controller and the GM or GMs, and we sat down with the controller and it was literally a line-by-line meeting. At first it was ugly, trying to get a handle on everything. But over time it became your best friend.

You knew that on Thursday you were going to go through and look at your expenses. You were going to go through your policy, you were going to go through your supplies. You were going to do a deep dive every single week. We went through work in process every week, and we went through all of our receivables. From a management perspective, I absolutely loved it, and I carried that with me going forward, because they were militant about expense control. It made me a better manager to do that and understand it.

And we could run reports. We had full access to the DMS, certainly I did as a fixed ops guy, and my managers did. So we could run schedules every day, or whenever we wanted to, and go through line by line and look at those things. And you didn't have to wait until the end of the month. It was every Thursday without fail. You're having an asset meeting.

Dave Rogers: You have to have the discipline to do it, and you have to stick at it. Too many times people just want it done, or they do it for a couple of weeks and then they stop. But the key part you mentioned that I think is worth focusing on is giving you the access to see it. I was in a public group, and we had pretty good access. We could see our expenses. We had a web version. They called it a browser, but we could dial in so deep on it. You could see all your expenses, departmental, the whole store. We had access in the DMS to go in and do a deep dive on expenses.

Our controllers and their office staff used to have to put together a workbook that was almost line by line on your financial statement, and it probably had 30 or 40 tabs. I think they skipped personnel, because I don't think they wanted to give everybody access to who made what. But every other expense line was broken down. You didn't even have to bother to go into the DMS. You could look at the spreadsheet and see what all your expenses were, and it was a trend too, so you could ask why it's different this month than last month.

But that's not every place. I've seen service managers and GMs who couldn't see a financial statement.

Steve Shaw: Yeah, and I actually have GMs in our system who have a very low limit they can approve, like 500 bucks. I get why, but you've got a guy who's your general manager, and he can only approve $500 without going to the big boss. It seems a little restrictive. But it's something that has to be done.

Controls up front: sign off on every invoice 19:15

Dave Rogers: Yeah, and the other thing is it starts with good controls up front. If you're going to really prevent expenses from getting out of control, you need to have a process in place where maybe two people look at a contract. Maybe every invoice is signed twice, or checks are signed by the GM or somebody. There's got to be a check and balance. A lot of GMs are check signers. Don't pencil-whip them. You've got to look through the things. It's huge.

If you're a service manager and you get a bill, you should sign off on it. Put your initials on it: that's OK to pay. If it's something you didn't order, or the parts guy didn't order it, you've got to kick it back. Don't just sign it, throw it in the bin and send it to the office. Know what you're buying, because the creeps are real. You see it all the time.

You see it with uniform bills, you see it with the Safety-Kleen guy. I'm not trying to throw anybody out there, but how about the nut and bolt guy who comes and fills up your bin? I'll throw Würth under the bus. Your expenses go up 30% when you get Würth, because they get a commission on that stuff, and the guys just sign off on it. And the first aid kit.

Steve Shaw: Oh my God, those guys.

Dave Rogers: Those guys come in every week. They fill you up. They probably walk around the shop and hand the guys stuff to take home with them. And who goes out and checks to make sure the guy put in the six boxes of aspirin or whatever else he said he sold you? All those things add up. It's serious. We have 30, 31 stores. I actually met with a company that does the first aid kits, and one of my questions was, how do I know I'm getting what I pay for every single time?

Steve Shaw: Right. And why do we have a monthly bill? How many people are actually getting sick, using the eyewash or getting band-aids? And that money goes out every month. One of the stores I was at recently does something I thought was great, and I've seen it for years. They call it green sheets. If something was going to be put into your policy account, or anything that went into your account, they made the manager sign off on it. If there's an RO that went through, before the office could book it, it had to be signed off on by the manager.

So it was pretty cool to see an actual company following processes. Nothing would hurt my heart more as a manager than something getting put in my policy account or my advertising account, something charged against my personal pay off net profit, that I had no idea about. So it was really cool to see a dealer group making the manager sign off before that money could go into the account. That's a nice proactive way of keeping it under control. I think most controllers or accountants would be good with stuff like that. But there are some that are not.

Profitability is a great deodorant 22:21

Dave Rogers: Well, listen, there are some that are not. And I don't want to defend everybody all the time, but there's only a certain amount of time in a day. And I think the computers are making things tougher to check, because things happen automatically. There are so many people posting things. There are different ways for ROs and parts invoices to get into accounts directly. Back in the day, when things were handwritten and hand-punched, there were probably a few more controls. What's this? What's this? Like when I used to reconcile my checkbook: what the hell is this? You'd actually sit there and do it.

And there are some people who don't give a shit. They just don't. I've seen it before, when people think, "Oh, the store makes money, so why bother looking at it? Don't worry about $500, we can write that off, this store is profitable." We had that conversation today. Tony did, and I was at the store too. I always tell him, and this is just something I've noticed over these years: profitability is a great deodorant.

It hides a lot of BO. It does. And I say that because Tony was at one of our stores today, and that store does make money, but they were very casual and very flippant about writing $500 off, writing $500 off. He was fuming, because I've been throwing that in his face for years: these stores that make a lot of money probably have a lot more going on than you know. But you're making the money, so you turn a blind eye, or you don't dive in deep. You don't want to upset the apple cart. And sometimes those are the stores where you're going to find more nuggets.

Steve Shaw: People say to me all the time, "So you're writing off dinner? You can write that off, can't you?" Well, yeah, I could write it off as an expense, but it's still my money. Sure, let's go out and have dinner. But it's a write-off? Yeah, it's written right out of my expenses. It's my money.

Dave Rogers: Yeah, right, because you own your own business. You're an independent businessperson. I get it. If you're talking about a public company, first of all, people don't even understand what that means. It's just an expense. But it affects somebody's bottom line no matter what. When you spend that money, people don't understand it. We should have a class on accounting one day. People get that mixed up. "It's a tax write-off. That's a write-off for you, Steve. Just don't worry about it."

Steve Shaw: It's just a write-off. My whole event is a write-off. Yeah, it's great. The government's not giving it back to me.

Dave Rogers: They give you the money back. If you buy me lunch, they give you the money back. It's a write-off.

GM tip: sign the checks and ask questions 25:17

Steve Shaw: That's hilarious. Well, we're about a half hour in, Dave. Why don't you give us a GM tip of the day? Give the GMs a good strategy on expenses. What are your thoughts?

Dave Rogers: Well, I think if you're not a check signer, you've got to get in front of the controller and look at all the bills every month. I think that's the simplest thing. It can be painful. When I was a GM, we did have to sign every check. It was a requirement. There were two signatures on there. I'd go upstairs to the controller and get a stack of bills, or I'd sit at one of the desks and sign them. Does it happen at a perfect time? No. But pencil-whipping the checks isn't the answer, I can tell you.

I worked with one guy who put them in a box. The accounting office was down at the end of the lot, so he'd take the box down, put it in the trunk of his car, and get to the checks when he got to them. But he also thought that if he didn't sign them, they wouldn't hit his P&L. So I had to explain to him: when they cut the check, your expenses are posted. Delaying the signing doesn't help anything but cash flow, and even then it doesn't help.

So take the time, sign the checks, and make sure you're looking at things. And don't be all proud of yourself and worried about what people think. Ask some questions. Hey, what is this? What do we need this for? We found a bill going through a store a couple of weeks ago where two GMs ago somebody signed up for a service we weren't even using, and it wasn't cheap. It was fifteen, eighteen hundred bucks a month, and we'd been spending this money for a couple of years without knowing about it. It can happen even when you do these things. It's amazing how much stuff pops out. So really dive in deep, take a look at it, and carve out some time when no one's going to bother you, because that's the only way you're going to pay attention to this stuff. That's my tip.

Steve Shaw: Awesome. That was a great conversation. Don't put those checks in your shoebox and take them home, because one of those might be for me. I'd appreciate it if you get that paid and sent off.

Dave Rogers: Yes. Get them signed. All right.

Steve Shaw: All right, well, I'll talk to you later, dude.