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PT the Auditor

Grace Periods They Can Cost Big Bucks

April, 2012


I was browsing my favorite website (www.parkingtoday.com) the other day and noticed the “Question of the Week.” It said there were two types of grace periods: turnaround and continuous. Which type does your location use? Turnaround, continuous, or what’s the difference? 

Half the people responding didn’t know the difference. That’s a pretty big deal.

Rate structures can be complex, so complex that few actually know what they mean. Many times I have had a building owner, a garage manager, a regional manager and an auditor in a room, given them an entry time and exit time, and gotten four different values for the ticket. The only way we found out what the rates actually meant was to ask the cashier in the booth.

Of course, this causes some problems when computers are asked to compute a fee. Often, the automating of garages causes many an upheaval within the garage staff with arguments over just how one computes the rates. 

Grace periods are a bone of contention.

A turnaround grace is something like “first six minutes free.” This enables someone who drove in and realized they were in the wrong garage or that they forgot their briefcase at home to leave without paying. Fair enough.

A continuous grace is time taken off the end of a ticket. That is, if a person had been in for one hour and three minutes, and a six-minute continuous grace was applied, the ticket would be charged for 57 minutes. See the difference?

In the first case, very few people who made mistakes were allowed out. In the second case, every person who left near a rate-change time would be given a discount. If the charge was 50 cents every 15 minutes, or portion thereof, in our case the person would normally pay $2.50 However, with the grace, they would pay $2 and the garage would be out $0.50.  Doesn’t sound like a lot, or does it?

If you have a lot with 15 minute increments and a six minute continuous grace, there would be 24 minutes each hour during which a person could leave and get a discount. That’s a 40% chance. Or to look at it another way, 40% of the non-daily max tickets would be subject to the discount.

If you have 1,000 such tickets a day, 400 would have been discounted, and you would be out $200 per day, or $52,000 a year. All because of the way your grace period is computed.

The problem can be exacerbated if the increments are charged at a higher rate. Assume the rate is $1 each 15 minutes, or portion thereof. My issue above would double, and the lot would be out one grand a year. This is all over six minutes.

A continuous grace is a leftover from the days when ticket dispensers and exit gates had independent clocks and they had a tendency to drift apart. The stamp on the exit ticket could be a few minutes off, and a customer might complain that they were being cheated.

To take care of this, they were given a “grace” to make up for any discrepancy. Today, all clocks are computerized and give the same time. No need for the grace.

I audited a garage in Los Angeles where I noted that they were using a continuous grace. I spoke to the owner, who understood the above issue, and he was horrified. This was a very high volume location with more than 1,000 tickets a day. Their daily rate was $3 each 20 minutes, $18 maximum. 

My owner knew he was losing money, but he didn’t know how much. We immediately had the operator change the settings in the software. 

I was curious. The mistake was made when an upgraded software was installed about six weeks previous. I did the numbers. In that six-week period, my customer lost $54,000, that’s fifty-four thousand dollars. All because of selecting a continuous grace vs. a turnaround grace.

Understanding how rates work is important. It can mean big bucks to your bottom line.

 

Woof!

 



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