"Certainly, we'll rectify that for you right now."
Guideline: Own Policy
Description:
This term refers to those costs that must be borne by the Sales Department that cannot be reclaimed or charged on to warranty or any other Department.
Just imagine that you sold a vehicle a couple of weeks ago and the cutomer has returned to you because there is a problem. You agree to rectify the problem for the customer, and the question is who pays the bill? If the answer is the Sales Department then this is known as a Policy Cost and is usually shown as a cost per unit sold.
Example:
A) Policy Costs = R53,760 B) Vehicles Sold = 960 C) Policy Costs per Unit = R56 (A ÷ B)
Discussion:
This KPI is usually shown separately for new and used vehicles as they both deliver very different results. As you can well imagine, Policy Costs for used vehicles are generally much higher.
You can usually find your Policy Costs within the Semi-Fixed Expenses of your management accounts.
Related Terminology:
This term is also known as Policy Adjustments, Goodwill or Rectification.