Pub. 1 2019-20 Issue 2

http://wvcar.com 30 WVADA BY THE NUMBERS M any times, when we begin working with a new client and exam- ine their accounting records, we find items that expose the dealer to financial risk (aka skeletons in the closet). The deal- er owner, the general manager, and the department managers are all surprised. Why is this the case? We have found the most common culprit to be a lack of communication between the account- ing department, department managers and ownership. Along with the lack of effective communication is a lack of accountability. We hear excuses from accounting and department managers. Accounting will claim they have made the managers aware of the issues and believe it is the department managers’ responsibility to resolve the issues. Managers claim they had no idea or that it is accounting’s responsibility to collect outstanding receivables or that accounting has made an error. Does this sound familiar? If it does, now may be a good time to review some of your policies and procedures. We have some dealer clients who have experienced this but now have very minimal past due accounts receivable, outstanding rebate claims, aged con- tracts in transit and vehicle receivables. So how did they turn things around? They now enforce weekly (in some cas- es, daily) managers meetings with a set agenda. They hold accounting responsi- ble for posting transactions timely and accurately and they hold department managers responsible for following best practices in their departments. The dealer or general manager can identify any breakdown in communication and clarify who is responsible for what in these meetings. Each department has its own “hot topics” or “hit list” that is discussed in the meetings. Below are our recommendations for some “hot topics” by department. Sales/F&I: •Contracts in transit aged over 10 days •Any uncollected down payments •Vehicle notes receivable past due •Incentive and rebate claims aged over 30 days •Incomplete follow-up for contract stip- ulations (subprime or special finance) •Overaged Inventory (both new and used) •F&I penetration with service contracts and other products offered Service: •Customer receivables aged over 30 days •Warranty claims aged over 30 days •Any accounts receivable extended out- side of established guidelines •Open repair orders outstanding more than seven days (We have found that the service department will keep re- pair orders open for employees and friends and family to bypass the un- collected repair work showing up in accounts receivable.) •Hours per customer-pay repair order and effective rate Parts: •Open parts tickets in excess of seven days old •Customer-pay special order parts (is a deposit or payment required?) •Inventory with no sales of 12 months or more •Manager review of DMS generated stock order •Phase-in, Phase-out criteria •Parts returns within factory protected guidelines •Wholesale customer receivables aged over 30 days Accounting: •Monthly reconciliation of all bank ac- counts, finance reserves and floorplan accounts. •Reports to department managers re- garding past due amounts, missing documents and other items. •Monthly reconciliation of parts inven- tory, as shown in the DMS to the gen- eral ledger. It is uncommon to find an employee who enjoys telling the dealer that a problem ex- ists and requires his/her attention. By ad- dressing the topics that create financial risk for the dealership, management, and own- ership on a regular basis, you will be able to evaluate the cause of the problem and effect changes in your established policies in order to minimize these risks. Give us a call; you will be glad you did! t By Tasha R. Sinclair, CPA/ABV Tetrick & Bartlett, PLLC Skeletons in the Closet