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Finance Commission per Unit

Finance Commission Earned ÷ Units Sold on Finance

Guideline: Own Policy

Description:

This KPI establishes the average amount of finance commission that you have earned on each unit that you have sold on finance.

The value of commission earned varies significantly between new and used vehicles due to the special subsidised rates offered by franchised manufacturers therefore this KPI is more useful when new and used finance commission is shown separately.

Another factor of high influence is of course a Business manager, who in many instances will be selling Protected Payment Plans and Gap Insurance to produce much higher levels of finance commission.

Example:

A) Finance Commission earned = R120,782
B) Units sold on Finance = 461
C) Finance Commission per Unit = R262 (A ÷ B)

Discussion:

You should check your own statistics to ascertain whether or not volume bonus is included in this figure along with the profit generated from warranty as these two factors often cause distortion.

You should also ascertain the units by which the commission is divided. The example shows only the units sold on finance, whereas some reports may divide the commission by every unit sold.

Related Terminology:

Finance Penetration

Units Sold on Finance ÷ Total Units Sold (x100)

Baseline: >30%

Description:

This KPI establishes the percentage of vehicles that you have sold that have been purchased on finance that has been supplied by your dealership.

If this statistic is to have any real meaning, then it is only retail sales that should be counted and any fleet sales should be excluded. Before you jump to any conclusions, be certain of the formula of your own KPI.

Example:

A) Units Sold on Finance = 461
B) Total Units Sold = 960
C) Finance penetration = 48.02% (A ÷ B X 100)

This example shows that 48% of the vehicles sold were purchased on finance. However, the important thing to note here is the classification of total vehicles sold.

Discussion:

Results also vary between new and used vehicles due to franchise manufacturers sub-vented finance schemes or other attractive offers for new vehicles, therefore this KPI is more useful when new and used finance penetration is shown separately.

This suggested baseline of 30% should be increased to a minimum of 60% were a Business Manager is employed.

Related Terminology:

Fixed Asset %

Total Fixed Assets ÷ Total Assets (x100)

Benchmark: 45% to 55%

Description:

The primary function of this KPI is to measure the balance between the investment in the facility of the company (land and building etc.) and the investment in the day-to-day business that operates within it. In other words, it assesses the balance between long-term and short-term investment.

This example below shows that of all the money that has been spent in your dealership, 48% of the investment is in the facility, and the remaining 52% is invested in stock and all the other things from which you hope to earn profit.

The calculation is taken from the Balance Sheet and is generally shown within the company summary.

Example:

A) Total Fixed Assets = R2,564,478
B) Total assets = R5,342,663
C) Fixed Asset % = 48% (A ÷ B X 100)

Discussion:

The reason for the 10% tolerance in the benchmark is because of the fluctuation in property prices around the country. Therefore an area with high property prices would generate a higher Fixed Asset %.

This KPI is only really valid when the land and buildings are shown on the Balance Sheet.

Related Terminology:

Funds Employed

Net Worth ÷ Interest-Bearing Borrowings

Guideline: See Circulation of Funds Employed

Description:

This term refers to all of the money that is invested in the company (or nearly all of it).

The total investment is all of the funds that are employed within the company to enable it to operate on a day-to-day basis.

Its constituent parts are Net Worth (the owners funds) and all interest-bearing borrowings. Items such as Creditors, Accruals and the like are excluded from this figure, as they do not attract interest payments.

The value of Funds Employed informs you of how much money is invested into the company to enable it to function on a daily basis and although by itself it is not a KPI it is used in the calculation of many other KPI's.

Example:

Discussion:

Funds Employed is always shown as a monetary value and is usually shown on the summary page of your financial information. If the value of your Funds Employed is not shown on your summary page you can calculate it for yourself from the balance sheet.

Please keep in mind that the value of the Funds Employed is not the same value as the Total Liabilities.

Related Terminology:

Funds employed is sometimes called Investment or Capital Employed.