Keep Your Dirty Dozen Clean: Doing So May Keep a Warranty Audit From Showering You With Grief
By Cliff Holmyard
Auto Dealer Advisor, 2005 Winter

Here are 12 tips for dealers to assure a spotless review in case of an audit.

Some call them the Dirty Dozen.

1. Customer signatures, including authorized signatures for dealership vehicles.
2. Repairs to dealer’s inventory and other items not covered.
3. Add-on repairs not properly approved.
4. Diagnostic and “00” time.
5. The three “Cs” (complaint, cause and correction) and other documentation.
6. Record retention.
7. Parts retention, return, and availability issues.
8. Sublet.
9. Self-authorizations.
10. Repeat repairs.
11. PDI claims.
12. Batteries, brakes, and alignments.

Whatever you call them, make sure they don’t become your warranty audit problem areas.

Dealerships should have a financial person who makes sure every required detail by the manufacturer concerning warranty categories is known and followed. In addition, each month dealerships should review the manufacturer’s frequency and expense reports to identify areas of potential concern before an audit occurs.

Also, dealers should remember that a technician is supposed to perform the appropriate documentation, not a service advisor. Any gauge or instrument reading needs to be documented and attached.

Here are additional ways to protect you if an audit occurs:

• Document excessive rental vehicle claims.
• Keep one year’s worth of records. (Check with your CPA on other record retention requirements.)
• Using non-genuine parts is prohibited, including fluids. Go through scrap bins and make sure no after-market packaging is there.
• Parts departments should not give out a new part until they get the old one.
• Don’t claim repeat repairs, unless warranted.
• Ensure that claim procedures are followed concerning batteries, brakes, and alignments.
• You can’t mark up sublet if you use a vendor that charges less than what the warranty allows.

In addition, there are two areas that dealers many times overlook that can help the balance sheet. Remember, you can claim time for transporting vehicles. In addition, many dealers do not make claims for items such as topping off fluids.