Yes...they spell that F-R-A-U-D...Part deux!
by: Bruce Gamble
In my last article we determined FRAUD was defined as “wrongful or criminal deception intended to result in financial or personal gain”. In this article I will be addressing the parts department.
Similar items must be examined in parts as we did in service. To review those items we highlighted in Part One:
- Everyone should have his/her own DMS login
- Review employee screen access
- Review exceptions reports daily
- Review work-in-process
- Recode department keys
- Restrict building alarm access
We will add some additional steps in the parts department.
Spot check delivery orders
It’s good business practice to spot check delivery orders. This would include checking a delivery order just prior to departure from your shipping area. Ensure that only the parts due for delivery are in the vehicle. You should also check inbound orders to ensure all the parts billed were received and not mislabeled.
Review payables daily
Review the payable invoices daily for all parts purchased. Ensure that all cross-reference information is noted with repair order/invoice and account distribution. You should spot check your DMS to verify the part was billed on the referenced repair order/invoice and the part cost and sale price are correct.
Perpetual inventory bin count
Create a bin map of all your locations. Randomly pick locations to be counted each week to validate the on-hand quantity. You only want to make adjustments to the inventory using the “P” for plus and “M” for minus. This process will allow the DMS month-end report to indicate to you the amount of adjustments from stated quantities. (If you need the formula to determine how many parts to count daily/weekly based upon your current inventory value just drop me an email and I’ll send you a worksheet).
Limit department access
All doors should be locked at all times. You are responsible for hundred’s of thousands of dollars of your dealers CASH!. When that annual physical inventory is taken there is only one person the dealer is going to hold responsible for parts not found and that’s YOU! Anyone who is issued a key needs to understand if something is missing then they are potentially liable. I would suggest you replace all door knobs that have a button to lock/unlock the door with a door that is smooth on one side and can only be opened with a key on the other. So if someone unauthorized is in your department it’s because they either had a key or someone let them in.
Purchase orders
When something is purchased from an outside source a purchase order number should be noted on the invoice. Don’t allow a “generic” number to be utilized. The purchase order is authorizing the accounting department to pay the vendor the authorized amount. They want to ensure the amount on the purchase matches the amount on the payable invoice.
What steps have you taken to reduce F-R-A-U-D in your parts department?
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