27 Stepsto Starting and Managing a Successful

Buy Here - Pay Here Operation

Step #5

Choosing the Right BHPH Software

Top Questions to Ask the BHPH Software Salesperson

I am an independent small business consultant specializing in Buy Here – Pay Here. Independence has its advantages. I do not have sponsors to satisfy or vendors that I endorse. Nor have I ever accepted commissions for referrals. Once I am familiar with a clients needs, I only refer them to vendors in the interest of having a satisfied consulting client. So, you can put away your checkbook! This is not a sales pitch – this is free advice compliments of WOSF Magazine!In this article, I do my best to provide you an independent perspective on BHPH software - the heartbeat of every successful operation.Having visited BHPH dealerships in 18 states, I can tell you that not all dealership management systems (DMS) are created equal. Here are some considerations for both managers and their owner/supervisors to consider along with some key questions to ask the salespeople when sizing up their product.

First, it is important to recognize that every BHPH software has its bells and whistles, but I suggest you sort through the sales pitches out there and focus on the nuts and bolts. Think carefully about how you and your personnel will use this tool day-in and day-out in your multi-million dollar business. There are some basic components you should expect from your DMS, especially in Buy Here – Pay Here. Let’s divide those needs into inventory management, sales, collections, security, operational management, and accounting.

Inventory management is very fundamental and most systems handle this area just fine. One area that has proven to be a problem with some is the “unconventional” acquisition of inventory, namely trades and repos. Specifically, does the software add such units to the inventory “internally” or is the user required to stock them in? In the case of a repo, does the vehicle become part of the inventory at the point of repo or at the point of charge-off? If it is the latter, how are you to track and manage those “pending” or curing repos?

Sales is an area where most of us can anticipate the need fairly well. All BHPH software can handle the basic steps: stocking in the unit, pricing, quoting terms, and even selling/financing. Piece of cake! However, the real test is whether or not you can perform these steps as quickly, fluidly, and creatively as you wish. A huge key to success in Buy Here – Pay Here is establishing a payment schedule that is a good fit for the customer. You and your customer benefit from your ability to contractually schedule deferred down payments, multiple payment streams, and even balloon payments where necessary. If you can formulate it, consumer laws allow it, and your customer can better handle it, your software should not prevent you from doing it!

Collections are job one! Software has to help us do that job well! I have seen a variety of collection managing methods that work well. Each method has different needs. However, there are needs they all have in common. The effective management of customers’ status with centrally accessible “electronic” notes is critical. Updated status in note form for all staffers to see! Additionally, the system should clearly display, ideally in a single screen, the status of an account: last payment date and amount, amount past due, amount and date of next payment, and any special approved arrangements. Some products offer the option to enter extensions in way that enables the user to capture those arrangements on reports. With proper training, this can be a nice feature, but it is not essential when good note management is available.

Information shown on payment receipts is worth a look as well. Customers appreciate a receipt that displays their name and account number, the date, payment amount including principal and interest split, and the balance after the payment. Most BHPHsoftware will do that.

Also, surprisingly, not all DMS systems can accommodate principal payments! It will be necessary to do that on occasion, so your software should handle it with ease. If your customer comes into some extra cash that they wish to pay on their account, the result should not have to be that they pay several payments in advance and are therefore not required to pay again for weeks or months. Ask your software salesperson to show you how it is done in their system. There should be no need to modify a contract in this scenario.

For those using or intending to use payment protection devices (PPDs) to encourage payments electronically, “integration” will be of interest. I use the quotes to denote the loose manner in which that word is used on this subject. My definition is an easy one to form into questions for the salesperson: “Will your software reveal the code from my PPD provider once a payment is made? And will it generate that code on receipts? Can I view the PPD code without leaving your software?” The answers to these would indicate to me an actual integration which avoids double entry of payments. The DMS providers can walk prospects through this process during a demonstration. Of course, the PPD providers can supply you with the names of any affiliatedBHPH software companies.

Security is so important in Buy Here – Pay Here and it starts with your software! I am not talking about encryption keys or internet firewalls for preservation of privacy or virus protection. I am referring to the security of your hard assets: cash, receivables, and inventory. Good BH-PH software helps you as a dealer/owner to deter theft in a number of ways. It does this with user passwords by, 1) associating users with transactions, and 2) restricting access to certain transactions and functions only to users that you have authorized. Such security restrictions should be the backbone of any DMS in your facility. For example, the authority to reverse or delete a payment, delete a vehicle, amend a contract, or charge-off an account should be strictly regulated in the software by YOU or your most trusted controller. Of course you hire honest people, but good software helps you keep honest people honest and keeps you in the know about irregular activity.

Regarding passwords, you’ll want to ask specifically if the software prompts for a password as a transaction is posted or only at the point the user logs in. In the trenches, it is just too common for users to walk away from their PC while logged on, making the user ID stamp on reports virtually useless.

Smoothly performing Daily Operations in the dealership is vital to your efficiency and employee morale. Among the things to consider in this area is the DMS’ printing method. Sounds mundane enough, but the method of printing in a car dealership is directly related to the employees’ blood pressure level! Ask any F&I manager printing those multi-form contracts on pin feed printers! The good news is that some BH-PH software companies now offer laser printing. It is definitely a question worth asking. With those offering laser forms, the forms are typically programmed internally according to state requirements and, once generated, they are stored in the system for future viewing or reprinting. The forms are designed and aligned internally in most cases, so there is no form adjusting necessary on the dealer end and the printed forms are very clean. Mind you, some will consider this as one of the bells and whistles, but with laser printers now very affordable, I look for it to become the standard.

For those contemplating a Related Finance Company (RFC), the ability to manage multiple portfolios may come into play. This is an important feature that may be of benefit to larger operations. In some cases, lenders may also take a security interest in a pool of contracts, creating another need for segregating portfolios. The ability to easily manage the transfer or sale of contracts at a discounted rate will also be of value to those selling contracts to a third party.

On the subject of Networking PC’s in the office, let me do the software companies a favor and explain that networks are really a hardware matter. While some software companies may provide some initial guidance in this area, I can tell you from experience that networks are very difficult to set up and troubleshoot from a distance. What you do need to ask the software salesperson is whether or not their product is Windows based. There may be a few DOS-based products still sold in the market. Find a local network specialist to be sure, but I believe your DMS network capabilities will be limited or nonexistent without a Windows product on a Windows operating system.

Accounting in Buy Here – Pay Here is a bit more involved than conventional retail. I am not going to pretend to understand every aspect of it. I do, however, have a much better understanding of the need for an accounting solution than I once did. This improved understanding comes from managing the consulting department in a BH-PH software company for 3 years. Add my on-site travels and my present ownership and I have definitely honed my BH-PH accounting skills. What did I discover? I learned that I need an accounting solution from my DMS and likely so will you. This is not because of limited knowledge, but rather due to the time involved and/or professional expense associated with preparing the financials. There are good solutions out there that can save lots of time and frustration. So, based on my experience, you have two accounting options from DMS providers: 1) internal accounting built by the provider, or 2) an export feature in the software designed to compile data in a format that can then be imported into various third party accounting products. Each BH-PH software company who provides a third party export will have chosen to do so in a way that is compatible with all or some of the providers such as Peachtree, Intuit/QuickBooks, and Great Plains. In the case of the first option, internally built general ledger accounting, I highly suggest you speak directly to references using the DMS accounting feature or module and even ask them to speak to their controller or CPA. Ask if check writing/printing is managed in the DMS. What about payroll? And ask the DMS salesperson if you can see the user training manual before you buy?

As a consultant and analyst, you probably guessed that the subject of Reports is very important to me. There are certain reports that are essential in BHPH for loss analysis, tracking collection efficiency, and monitoring transactions known to indicate possible negligence or theft. Ask your software salesperson for sample reports on cash inflow (by type), repo/charge-off loss analysis, transaction logs, deleted vehicles, deleted payments, amended/modified accounts, detailed delinquency, recency (days to last payment), expired insurance, projected payments, and adjusted gross profit (all profit or loss from operations before expenses). This last one is an excellent basis for a manager’s bonus plan. More on that in a future article.

I wouldn’t consider software for my business that wouldn’t generate a report of payments that are contractually due for an upcoming period. It is that important! Every BHPH owner, manager, and collector needs to have access to a report that shows exactly who is expected to pay and how much during an upcoming period. I could write for pages on how to use this information in managing collections and tracking efficiency, but as David Letterman says, “That’s not why you called.” So, for now, just make sure your software can project payments that are contractually due for a future period and look for more on the subject in a future article.

For my fellow analytical types, I know you’ll expect the ability to export all reports to Microsoft Excel. Thankfully, this is now fairly standard. The ability to create custom reports and export the results into Excel is a must as well.

There are bound to be lots more reports that may interest you, but the ones that are listed here are essential to good management and theft control.

How Updates to your DMS occur is the final consideration. If your software resides on a local server, will you receive CD’s by mail? Or will you obtain updates via the internet? And will all users across the country receive such updates at the same time? This can be a real problem when you need support. Otherwise, can you be sure that everyone on the DMS’ technical staff is versed on support for your version? Will the company keep up with compliance changes in your state or will that be your responsibility? And if there is a compliance change, will they reprogram forms? At no charge?

There are web-based DMS solutions in today’s marketplace as well. This means you essentially log on to a website and therefore utilize the only version of the software available. This also means you are constantly up-to-date and that you can access your software and perform all functions from anywhere on the planet with internet access. There is no “backing up” of data. All data resides with the web-based DMS, but export features allow the user to capture all essential data for peace of mind.

When it is time for you to choose a Buy Here – Pay Here software, you can rest assured that there are some very good products out there. The industry has come a long way technologically in the last decade or so. Plus, a rapidly growing and competitive market place has prompted a lot of progress among DMS providers. You and I as dealers are the beneficiaries! Just keep a focus on those nuts and bolts and you will find the software that is right for your well-oiled BHPH machine!

For a list of the questions mentioned in this article or a list of known BHPH software providers, e-mail .

Jim Rhoads is the President of Four R Enterprises, LLC, a Texas consulting firm specializing in start-ups as well as ongoing training, consulting, and analytical services in the field of Buy Here - Pay Here. He also owns a BHPH dealership in Oklahoma. Please direct questions or comments about this article to .