After a slow start in January and February due to a harsh winter, sales are improving and 2014 looks to be another strong year for dealers. It is important to meet each month and reflect on the financial results with the individual in charge of your accounting office. Often times, a dealer will pressure the office to finalize the statement before the necessary steps are completed. The dealer wants the results and is not concerned about the details and that can be a costly mistake that can be easily avoided.
The office manager must review and reconcile each balance sheet account on a monthly basis before the statement is finalized. Time should be dedicated to adjusting all accrual and prepaid accounts monthly. This should be the expectation of every dealer, and this should not delay the finalization of the statement by the tenth day of the subsequent month. I encourage dealers to utilize our Office Manager Monthly Checklist to assist you with this process. The checklist requires the office manager to affirmatively “sign off” that steps have been taken to ensure that the schedules have been reviewed and reconciliations have been prepared prior to the finalization of the statement. It also provides an opportunity for the office manager to address exceptions such as over aged receivables. I strongly encourage a “face to face” meeting to discuss any exceptions or problem areas.
I have found a handful of clients struggling with past due receivables this past tax season. I also found that when these issues were presented to the dealer, he or she was not aware of the problem. The office manager must keep the dealer/general manager apprised of past due accounts. All department managers in the store should be reviewing their department’s receivables on a weekly basis. The manager’s compensation should be reduced when receivables are written off in their department. A tremendous amount of effort is wasted researching older rebates or warranty claims. As soon as a receivable becomes past due an alarm should sound and the matter must be resolved immediately. Many manufacturers have policies that state that once a receivable reaches a certain age, the dealer can no longer request payment.
Most dealers/general managers have a background in sales, and accounting is not an area of expertise. This should not preclude them from spending the time to meet for an hour or two with the office manager to review the monthly financial statement. There should be no excuse for having “sloppy” accounting records. In my experience, I find that our most profitable dealers have impeccable financial reporting. Do you meet each month to review your financial statements with the office manager?
If you have any questions regarding this article or any dealership management issues, please contact Paul McGovern at PMcGovern@DowneyCoCPA.com or 800-849-6022.
