As dealerships seek ways to maximize efficiency and cash flow, many are taking a close look at their contracts in transit (CIT). Traditional paper contract packages spend an average of five days in transit according to Dealertrack data. They get packaged into an envelope and shipped to the lender, which means they can’t be reviewed – much less funded – until they’re delivered and opened.
That’s the best-case scenario. If the lender requires additional documents or there’s an error such as a missed signature that leads to re-contracting, the funding can get delayed further.
Here are five things your dealership can do to cut down on contracts in transit:
Tip 1: Know Where Your Contracts Are
Tracking your contract status is essential to finding out the scope of your funding delays. Make sure you have regular meetings and discussions with your F&I and back office teams about the number and dollar amount of contracts in progress that not yet funded and potentially holding up cash flow.
Make this information part of your daily heat sheet/CIT meetings with all teams to stay aware of your cash flow situation. Some dealerships have found that they can effectively manage their CIT by making it a part of each a team’s goals.
Tip 2: Look to Technology
Dealertrack data shows that one out of every four paper contracts contains an error such as missed signatures, contracts not meeting lender requirements, missing stips, and other errors that can lead to re-contracting and make the contracts in transit period longer than usual. In a recent survey of dealers, nearly 70% said that missed stips contribute to delays in funding or their CIT.
eContracting technology is designed with checks in place and built-in verifications to ensure that you can’t proceed without required information and signatures. It also reduces data re-entry by importing information from the DMS, so you can avoid accidentally introducing errors that can come from re-typing.
Another big advantage to taking your contracts digital is that you save money, not only by making the contracting process faster, but also by reducing hard costs such as floor plan, shipping charges, and paper forms.
Tip 3: Keep Your Lenders Close
Get to know the requirements of your preferred lenders to help ensure that everything they need is included in the funding package the first time around. Make sure your support staff gets a checklist to help them gather the necessary documents for your lenders – or use a digital solution with an integrated checklist to remove the guesswork from the process.
We also recommend staying connected with your lender reps so you always know who to work with to address any funding that gets stuck in transit.
Tip 4: Start the Clock Sooner
To really optimize your processes, rethink when “contracts in transit” begins. Rather than starting the timer at the end of the day or the next day, look at integrating your front and back office processes to get the deal out the door before your customer drives off the lot.
Take advantage of technology to speed up stip collection: scanners, copiers or tablets can get the documents into your computer and ready to submit in seconds. Make it a goal to submit each funding package as soon as it’s ready and see how that helps speed your cash flow.
Tip 5: Get Your Whole Crew Involved
Funding should not be the F&I department’s responsibility alone. Provide access and visibility to your software solutions so that sales, F&I and the back-office staff can improve the dealership’s overall workflow efficiency, including speeding trade-in titling to keep from holding up that portion of the deal.
With all your staff trained on the software, checklists and equipment you use in the dealership, you can work as a team to support F&I to get deals finalized, submitted and funded. Be sure to establish a process for training new employees and make use of free online training sessions from OEMs, lenders and software providers.
There’s no need to wait to start reducing contracts in transit. From optimizing internal processes to adopting technology solutions, your dealership can begin to overcome cash flow roadblocks now.