Wake up, Buy Here, Pay Here people. It's a beautiful day. Go grab yourself another cup of Joe and say hello to Jim and Michelle Rhodes on the Buy Here, Pay Here morning show. Take it away, you two. Test, test, check, check. Hey, good morning. Still kind of messing with our audio setup over here. Jim did a meeting yesterday, a V-plus meeting, and completely changed. Mess with the soundboard. Just say it. You'd think we would know. Yeah. Yeah. So everyone, if, yeah, let us know if you've got any audio problems at all. Yeah, let's get an audio check. Anybody listening, just throw some notes in the comments so we know that you're hearing us. Yeah. Yesterday was a good day with some of the stuff that you, yeah, we did on V-Aid. It was a V-Aid Plus meeting, and it was Ask a Lawyer. And so our White Hat Way, who's an attorney, who's um who's just like so gracefully joined what it is that we're doing um allison harrison um she came and answered questions shout out to allison yeah yeah yeah and it was uh it was uh feedback you got was just like it was so great to be able to just ask questions and get answers yeah we had several dealers in the meeting and um and listen if you're listening and you're not sure what v-aid is please reach out let's get you in a v-aid dealer group these are affordable uh groups where we compare and then the v-eight plus thing is kind of a bonus track that we have on top of our v-eight home group so uh yeah yesterday we had to kind of ask a lawyer thing and the comments that came back was like oh it was great because she actually just answered the questions like right yeah it makes a difference yeah so people had very specific questions and they got very specific answers and it was really good yeah we're grateful to her for for making time to contribute in that way And yeah, then we had a meeting last night of one of our groups. That's the larger groups. And that went really well. That group is solid, really learning from one another. Their data is now, you know, represents a little more than a year with most members. And it's just, we're really starting to get kind of the formula, if you will, dialed in on some of these groups. And that's certainly one of them. yeah anyway shall we dive into our I think that sounds like a great idea So today I chose to bring the subject of portfolio analysis, which is something that, you know, I've been working with portfolio analysis for many years. Yeah, when I met you, you were doing like deep portfolio analysis for a few handful of clients and it's a big deal. Keep in mind, I was first a consultant in this space twenty five years ago, but I wasn't doing back then. I wasn't. doing, you know, the deep dives that we do now. And, and, you know, now we've got more history and more, you know, ways to kind of go about calculating. And sometimes my terminology might be different. What somebody else calls loss to liquidation ratio, I might call conversion rate or whatever, but it's, it's pretty much all calculating the same sort of methods of yeah uh measuring performance words words so words they vary and they matter yeah well as as long as you're able to communicate like this is what this is and yeah but and that's probably part of why I choose different language as a former dealer myself I just try to put it in language that I think the dealers can uh it makes sense of it's at a high level you know wall street kind of calculations yeah and that sort of thing for in the in the finance sector so so this is something that we you know we do and so for today what I did is I prepared the same template that we always use and I what I didn't uh pull together in time for this broadcast was the the um the kind of the illustration of how it looks inside a V eight dealer composite, for example, in their summary report, because one of the things that you, you know, you hear us talk about, we've talked about on the podcast plenty of times, and this part of why we came up with the white halfway portfolio summary report that we proposed to all the DMS providers, because we're always trying to help dealers first, reconcile, you know, it's like a soft reconciliation of principle in their portfolio. And the reason that's important is because we can't begin to analyze the portfolio performance until we know what's moving in and out of the portfolio. So it's just kind of step one. So that's why, and I'll go ahead and share the template I got. I think we've got it set up where we can do that. Let me try it. I may have to reposition that just a bit, but one moment, but I've got a template kind of teed up where we can illustrate and give me a minute to get it. Okay. So now I'll put it in. Alrighty. So I can't really see both at the same time. I'm going to do that. That'll make it a little bit bigger. Yeah, so this is a template that I've used for quite some time, and I want to provide this to anybody who will just send me an email. You can see my email is there, and it says here, all data supplied to White Hat Way is held in strict confidence. For info and questions, contact jim at whitehatway.com. So jim at whitehatway.com. Yeah, and if you put that banner up for folks to see, if you wouldn't mind that way, just know if you want to receive this template, then along with a tutorial kind of instructions on how to complete it, then, you know, just send us a note and just put on there, you know, free template and we'll, we'll get this thing to you because what it's designed to really do is capture the key numbers that are going to be First, identifying the portfolio. Well, and I would just like to, before we recognize that on all of our podcasts are syndicated stations, you don't have visuals. You don't have the videos. So those of you who would like to kind of see what this is all about, please go to our YouTube channel. And I think I've got that. Cued somewhere. Subscribe while you're there. While you're there. It's YouTube, Jim and Michelle Rhodes slash Buy Hair, Pay Your Auto Finance Coaches. Right. So yeah, just find us on YouTube and that way you can find all this stuff on video and see the screens that we're going to go through here. like and subscribe. Yeah. Yeah. All right. So let's go back. Yeah. So you see, you see the template on the screen, right? So I'm going to start throwing some numbers in there as an illustration of how the thing is meant to work. And the reason when you talk about portfolio reconciliation, I've just got this thing set up for January through, it looks like it actually goes out to I would say if a dealer is going to complete this, we would want to see at least six months. Okay. Well, that's, I mean, you can put in two months, but it's not going to be as like rich of data kind of thing. It wouldn't be reliable. I would be reluctant to make any recommendations or any kind of conclusions based on a few months because the numbers move up and down based on a heavy charge off month and what have you. So, Basically what's happening here is we want to go back and not every system is going to have this. So hopefully you would have these balances captured somewhere. Obviously you could just do this thing starting on, you know, on April first and start doing it going forward. Uh, but the real benefit of this thing primarily is to be able to build back your history and now take that and, and build some sort of projection from that so that you can. And also one of the things I will do when people, uh, request this template. When they complete it and send it back to us, I will prepare for them a free analysis that basically gives them their own results adjacent to our V eight averages, which would be brought from dozens of dealers. So that way they can see kind of how their own portfolio performance stacked up. But let me just show folks kind of how this thing is completed. You know, if you just had a starting balance in, I'm looking at the month of January here, if you had a starting balance of a million dollars, and you did um let's say you did a hundred and fifty thousand dollars in originations okay so you'd put that number in there new contracts added to the portfolio just the principal part just the amount finance and then principal collected so we got to separate pni in some systems that's super easy and others you know it's surprisingly you know requires a little bit more but if we put Let's say we collected thirty five thousand in principle. We'd put that in there in the month of January in this example. And then if we charged off twenty five thousand, And then it asks for other principal adjustments. So sometimes these are, and you can see as I hover over there, there's descriptions in there. Very helpful. Explanation of what these things are. And then this is not common, but might be smaller negative adjustments like such as write downs or different softwares, different names for these things. It could be no pays or, you know, again, different names, but we're really just talking about something that's not in the charge off category, but that did get, adjusted in the portfolio or adjusted in customer's account. So the common scenario would be there's a payoff check comes in and it's like, you know, three hundred dollars short of the payoff. And instead of making a fuss about we just choose to write it off as we post that check. And so you'll post that, you know, as a it's really not a charge off, but it belongs in here. So let me put a number in there of eight hundred dollars. so now what that says is calculating right there on on row according to this if we started with this and we added this much a new principle and we um collected and charged off this much and had other adjustments we should end up with that and now we go to the report and see okay let's say that we actually we show at the close of the month that we actually had get the right number zeros in there So this is pretty typical. It's pretty uncommon for dealers, unless they really know what they're doing, they're really familiar with their software. It's common for us to be off by a small amount, right? And so it becomes a question of how much effort do we want to put into chasing it? So that's point eight percent is you're off. It's how much we're off. And when you're working with dealers, you try to get it within what? One percent. And so it says that here, too. So it's under one percent. So, yeah. So we're trying to get that. So we're under one percent. So we would just move on. If that number came out to be much more than one percent, I would recommend go back and look at the numbers, adjust what you need to adjust to get that to balance more closely. Why? Because once we finish like this row right here, how much principal we collected, having that number be accurate. It's going to be really important in terms of calculating portfolio performance. Having this number be reasonably accurate is going to help us calculate portfolio performance. So we've got to get numbers that are fairly close. And then you can see once I entered this one point one million for the close of the month, it brought that number up to the start of the next month so that we start calculating. each month with a fresh, you know, correct balance, so to speak. And, and that way we just keep moving forward and keep loading that. So as many months as we could put in there, again, I would say at least six months to give you any kind of reliable, you know, performance history. So, and so basically what you're, okay, you haven't got, have you not gotten to the end of the full performance part? Well, let me explain. I'm going to throw some numbers in here. Interest collected might have been this. Let's say we had twenty five thousand in charge off. So let's say we had ten thousand in repo recovery. The reason those go on a separate line down here is because these don't affect principal. So this is why that White Hat Way portfolio summary up here is just looking at principal open new. I call it principal activity. Like we're trying to identify the principal activity. Why? Because Most of us are simple interest. The principal balance that drives the interest that we earn. So we need to make sure we know. And the other thing I talked about back when we did the White Atway Portfolio Summary Report is, and I had a conversation earlier in the week with a DMS provider. And I just, without having them answer me, I basically said, I know that any dealer anywhere on simple interest And in probably, you know, rule of seventy eight for that matter, too. But we mostly work with with simple interest is like any customer who walked in and wanted to pay off their account today. We would have to be able to produce a payoff statement that showed exactly what the principal balance is, exactly what their accrued interest is. So my point is pretty much every DMS system should have every customer's precise principal balance. every minute of the day, right up to the last payment posted. So what that tells me is that the principal activity, the principal movement in the portfolio across a range of time, in this case, we're dealing with a calendar month, it ought to be It ought to be accurate. It ought to be there somewhere in the system because those DMS providers have a very specific obligation to report to the customer because Iowa's dealer has a responsibility to report to the customer. So this is why I say it's all got to be there. So that's why this top section becomes important. If it's not balancing, most likely it's because dealers didn't capture their actual notes receivable balance at the start of the period. And that's common. A lot of these systems don't. Um, don't record that, or they might not run the report until one o'clock in the afternoon on the first. Now it's not quite accurate because there were payments that came in and got posted. And so this typically contributes to, you know, kind of, and this is why we just kind of trying to help dealers. We can't really know. precisely what our portfolio performance is until we can get these things nailed down but this is just a practice this is I'm just kind of today illustrating a methodology and so again if people just want to contact us they can send an email to jim at way and just say I'd like to have the template we'll send it to you and then if you want to complete it and send it back to us we'll provide you that comparative analysis so you can get a feel for where oh yeah yeah what a great value Yeah. Just trying to give folks a feel for what the practice is. And then they can reuse this template and expand it and keep using it as a, as a tool going forward for their own analysis. But I think the key thing is just helping people understand where to start. Like, what is it, what do I really need to know? And so, you know, you could work backwards. It's just, it becomes tricky if you're going to work backwards. Let's say, let's say I got a dealer who, you know, we're sitting here after they complete March, they want to do six months worse. So they're going to go back to October and, Well, in order to do that, you would need to come back here to September and put whatever your, you know, your portfolio balance was at the close of September. And now it's going to give you it's going to bring that up to October one. Right. And now we can start working October forward. So just understand that that's the calculation process there. And this is a really great tool for looking in the past as well as aiming for the future. So it's like you're able to, when we talk, a lot of dealers are like, what are my KPIs? What should I be? And this is just about understanding your numbers. This is kind of like a... key performance indicator of like, are you, are you putting things in the right columns? Um, and are, uh, so, you know, the, like you said is, is it's keeping it to that one percent or less of, of the, um, the deviation. Um, And so it's just it's kind of a way to just kind of keep a temperature check on how how well you are attributing different things and the movement of your portfolio. I mean, yeah. And if nothing else, even if we don't analyze portfolio from this, I think it will be a real test of folk software. And to extend their processes, because if they're not capturing these balances, then, you know, it begs the question, like, how can a CPA do accounting? And they've got certain reports and they can do a calculation that says, we apparently started the period with this balance of receivables. And we, you know, we calculate that we would have closed the period with this, but it's like that stuff really ought to tie together. Why, why, why would I set that bar? Because again, again, my gosh, we're responsible for tracking our customers' principal balance every minute of the day. So that just means we should have those numbers. And if our DMS won't quickly get us there, then it's maybe a time to look at, you know, am I on the right DMS for my situation? And so this is a good way to find out. But also just once you have it, then we can start to run calculations on those conversion rates in terms of how well is the portfolio converting to cash? How does my charge off experience compare to other dealers? Right. So this is the way we measure. It's just like really, really valuable, I think, for dealers to be able to get just pretty look at their numbers like this and also be able to do a comparison to dealers around the country. And, you know, we your cameras off, by the way. You know, it's the value of being able to see in kind of real time where you are in comparison, because I mean, gosh, so many dealers, it's like I'm on a lone island. And I know based on the stuff that I've been looking at, whether or not I'm in a place that it's like I feel good about or, you know, it's stable or whatever. And it's just super helpful to be able to kind of start to see how other people are, are where their ratios are and all of that so that you can know. all right, I'm in a good place or hey, there are some things that I need to be working on if I want to be able to get within these ratios. And so again, dealers all the time are like KPIs, KPIs, KPIs, KPIs. And it's one thing for you just to throw out a number and throw out a number. This is a way for you to measure not just like in a single snapshot, this is where I should be. So I'm doing something wrong, but be able to measure over time, you know, where you are in, in relation to just how, how your portfolio is moving, what kind of, what kind of repos you're doing, what kind of, you know, how much you're collecting. Cause there's other pieces to this that you could just like, so what is your collection performance look like? And yeah. Yeah. this is an area where we need to get quite specific because we're running our business off of that. People are out there having conversations on social media and elsewhere about what it looks like. And if people are making business decisions based on this, I think it's important. And you know, we, we strive to make sure that when we talk numbers, we get as specific as possible. So what dealers can expect to see when they send in this template, you know, they fill it out and they send the numbers back in when they get something back from us, what it's basically going to illustrate is, um, Here's your results. Here's the results of. Seventeen dealers of similar size who across this time period originated X amount of dollars. Right. So they can get we try to give them very specific comparative information so that they can have more confidence in what they're looking at. And it's just, you know, I've said in the past, I think we have to be careful. We have to move. beyond opinions. Oh yeah. And just, you know, verbal exchanges like, let's get specific when it comes to numbers. Yeah. And, and, and that's, that's kind of one of the things with, with dealers that are in a twenty group or in a V eight group or whatever, where they're getting together with other dealers, they ask, different questions and they have different opinions because, you know, it's one thing to have an opinion as soul man on an Island, because it's like, this works for me to like, look at what are my assumptions? What are my opinions? And do they, are they solid? And so something like this, the, the cool thing that I learned, I appreciate about it is that, you know, one, you're gonna be able to kind of see where your ebbs and flows and, and, and that, and, you know, sometimes like if one month it's like, I didn't do well at all. And then you can put in there and go, Oh, that was when, um, so-and-so did such and such and or that this thing or had a management change or whatever and so you're able to just really in just a very holistic way look at the things that are happening in your business and then you know if you feel like there's something off or that you weren't aware that in comparison, this is where I'm at, then that's a different conversation. That's like, all right, so what are the factors that are driving this and this? And so that's where being in some kind of a dealer performance or peer group is really, really, really valuable. Yeah. That's where having a coach or a consultant or, you know, something that can just, like, really dive into those things and see if they can identify, if you can't identify, like, where the opportunities are for you to improve. Yeah. And I think I can share with, you know, listeners that, um, so on our V eight format, one of the things we do, you heard us say, we, we, we validate the numbers to plus or minus one percent on the portfolio. We just try to make sure dealers, you know, if they get a numbers in, if that's off, we go back to them and say, Hey, we're off by this amount. Can we figure that out? And so that. That does a couple of things. We had one dealer, for example, last or this month from last month's data was off by about two hundred grand. They had been in balance the month before and this month they were off by about two hundred grand. Well, most of us don't want to under report or over report two hundred grand. That's going to misrepresent our results. And so that's that's that's not a livable. Well, it's it's also, though, it's two hundred thousand dollars off. It's also in relation to how large your portfolio is together, because we've got, you know, you work with dealers that have massive portfolios. And so two hundred thousand dollars off when you're looking and you're looking at it in scale is not that big of I mean, it's still two hundred thousand dollars, but it's not nearly as a like. What the heck is happening here as a ratio as with someone that represents a much larger percentage of their portfolio? Yeah, but I would say even the largest dealers, you know, multimillion dollar portfolios, even if you're off by two hundred thousand dollars, it's like. Did that two hundred thousand where our calculations are off? Did we collect two hundred thousand more than we're reporting? Did we charge off two hundred thousand more than we're like? That's a big number to not know which bucket it belongs in. And we know from one of our clients that we've been working with for a long time that even when you have a larger portfolio that you can, when you really, really understand every little piece of, you know, and, and we're, we're attributing things the same way. And so that, you know, your procedures for how you do this and you, how you do that and that it can be, you know, dollars or cents close to like balancing to the penny kind of thing. Yeah. And, you know, it doesn't have to be a penny for sure. Most systems would take a lot of work. You know, we spent a lot of time with one of our clients trying to get to a place where we could finally identify all the pieces. And, you know, some of them, even though the software is fairly sophisticated, it didn't the reports didn't automatically include the principal balance. That or the principal amount that was collected or charged off or written off or whatever it didn't. So we had to go kind of customize reports in order to be able to capture the actual. Which is so interesting when, you know, we we work with a lot of different DMS providers and and you say, I need to get this. And they're like, yeah, it's right here. And so you show it to us like, no, that is not what we're. And it's words, too. Yeah. Or that they haven't been a data analyst in the buyer-payer space. And so it's a different thing you're looking for than someone who hasn't. dove that far into numbers that you know it's like this is what our program this is what our system has and so this is your answer and it's like it's not and yeah and listen folks it's well established that I'm a numbers nerd right yes it's one of the things I find so endearing oh yeah well good thank you it's really just about to me I want to be precise I mean we want accuracy here within reason there's a you know reasonable amount of effort we can put in these things but I think that the The opportunity in digging into that is a couple of things for these dealers. It lets them verify that they can identify all the moving pieces. And so it's a, it's a first step toward, in this case, we're talking portfolio analysis, but this same thing is going to serve with theft analysis. I was going to say it's accounting. I mean, we just first have to identify all the moving parts. Are you, are you, are you just bleeding money? And not sure where it's happening and it may not be theft, but it's just like, oh my gosh, this is something that's worth looking into about why there's this discrepancy. And I mean, sometimes it can be in, yeah. Well, sometimes these numbers are being reported like in our VA format. Sometimes the numbers are being reported by the CFOs or the controllers. And so it's really begs the question about do we, how well do they know the system? Do they know the, like from an accounting standpoint, even like it just, it just begs the question, like, and I'm not picking on anybody. I should really. No, it's, but that's like, it adds another layer. It just points out that, you know, there's, there's stuff that we don't, Because dealers are busy. They don't, they're not typically, if they have a very sizable operation, they're not the ones who are producing these numbers. Many of our dealers do, but it just kind of depends on their stage of business and how much they enjoy working with the software probably. Yeah. And when you talk about accounting, um, Most dealers, really, when you look at percentages of people that we've worked with, most dealers just have their neighborhood accountant. And so a neighborhood accountant also does not understand how money, deeply, unless the dealer has gone in and really- taught them right um most accountants don't deeply understand how money moves around and and you know what that's a good point this this thing is um that's one other area where this particular um effort to sort of do the soft reconciliation on the principle is a component of cash flow analysis. So if we're going to measure cash flow performance, especially like a direct cash flow, not so much like the cash flow statement that comes out of QuickBooks, it really doesn't mean much to a buyer, payer, dealer. But if you can produce a direct cash flow statement, which we're giving a simplified sort of cash flow snapshot in our VH summaries, So that people can get a feel for, they have to report their operating expenses to us in order for us to build the debt. But because that part's optional in what we do. So it's just side note a little bit, kind of. You know, it seems this is me saying, drawing a conclusion from all the conversations and things that we have frequently, is that there's two people that are really, really important to your business, that it's important that they understand the business. One is your accountant and the other is your attorney. is having someone that really understands all the moving pieces because then they can give you just solid feedback and know what it is that they're looking for. And from my perspective is when you do have an accountant and an attorney that really understand the space, you know that your questions are going to be answered in a way that, one, is going to keep you compliant, and two, is going to keep you compliant with the IRS. Right. That's a good point. So, yeah. That's true about the accountant. I would just say I'm typically going to be advocating for most dealer principals that they have somebody in the chain between them and the accountant and who understands the internal procedures, the processes and the software well enough to be able to reconcile a report like this before it goes to the account. Because if the accountants say, you know, garbage in, garbage out, it's like, if you don't, if they don't get good information, they can only produce accounting as good as what's delivered to them from the software. And so they've either got to become software experts and most, And there are a couple that are out there that are really, really prominent in the space, but they are not. And so this is a problem that we see across different DMS systems. But this is why I say I would be advocating for the dealer to have somebody on the team. Yeah. And that's why we make ourselves available to help these controllers and office managers to come up on a meeting with us and let's walk through the numbers together and let's figure it out together because we have some familiarity with most DMS systems, right? Yeah. When I was thinking about the dealer that we've been working with for a long time that you've got it down to the penny, I just from observing the many meetings that you and the dealer and their accountant have. Because the accountant was not familiar with the space. And it's just that from the feedback I'd get after your meeting, it's like, oh, he got it about a couple of different things. And so he's looking at this just a little bit differently than he did before. And it is helpful. Yeah, and that's just the difference between operational decision-making versus accounting. And so there's financial analysis, and then there's analysis of the operation. And one of the things that I enjoy doing and the work that we're doing with YI Way is we're working to bring those things closer together so that the work that we do is why the reconciliation. It's a step toward helping on the accounting side. Because we should be able to rely on this principal reconciliation. When we get that thing to plus or minus one percent, hopefully the dealers will get familiar enough with their software. Because, again, if our software won't give us every number to reconcile our principal, then we really need to ask ourselves if we should be looking at a different software. Because this is really something that... I mean, it's just so fundamental. It's like I said, we have to know the principal balance on every customer at any end of the day. And just with the amount of dealers that we work with and are in their, not necessarily their software, but their reporting, is there are some that are more elegant and accurate. And more complete. And complete than others. But, you know, we've found that in a lot of ways that there's ways to get there. Yeah. It's just sometimes a lot more work. Our typical dealer is not going to have the knowledge or the time to export reports and run pivot tables and all kinds of, you know, kind of higher level. Unless they're, unless they're Excel nerds, like, you know, like you and they're not all up. Yeah. And so this is the point is like the software ought to do this for us. So we pay for our software and we, the software's got to track this principle. Yeah. Spit it out for us. This is why I didn't expect to end up talking about the White Hat Way portfolio summary report again. But you can find that podcast that we did. We introduced that and made that request by email back in June of twenty four. And we're just going to keep kind of renewing that request on behalf of dealers so that every DMS can help get us there, because we would love that. Those numbers I showed you on the screen opening balance. new originations collected this much charge off this much and just spit it out on a single report across whatever date range I choose then that's that's kind of a that's a pretty reasonable bar yeah yeah I'm george I would just love that you know george always listening is I think the personality of the two professionals you mentioned also should mesh with yours which is very true he says I just had a dealer leave a very qualified and recommended accountant because just because of style and that's the you know obviously um yeah that's that uh you know there's going to be some people that you mesh wish and some people you don't and then there are those that it's just like I can get over this too yeah that's true yeah yeah it's a whole other conversation it's a whole other conversation yeah but yeah I do um what else we got is that it should get on to the rest of our friday oh my god it is it is friday isn't it um I uh didn't I come back There was like a whole lineup on certain stations and it was TGIF. And I think that, oh yeah, there was the family, all sorts of like family programming, thirty minute whatever sitcoms and stuff. I remember that. Of course, I'm a lot younger than you are. that's true that's true you can see it yeah of course yeah um hey everybody thanks so much for joining us today we really appreciate you being a part of the um our audience and podcast again uh go to our pod or uh youtube's channel um jim and michelle robes buy your pair coaches subscribe subscribe over there too and um hope you guys have a great rest of your day thanks again for joining us and uh have a great weekend it's like a lot of this stuff is starting to wrap up and yeah enjoy the weekend all right thanks everybody Thank you.
