Comments Off on It’s not only about identifying vehicles on the schedules or floorplan
By Phil Villegas
We often come across dealerships where the process of taking monthly physical inventories is a bit relaxed. When asked about their physical vehicle inventory procedures, we are often told:” Yes, we do physicals…our sales department handles that” or “Our bank does a floorplan check monthly” or “Yes, we have a porter touch all the cars.” While these might be elements of verifying the vehicle inventory, these approaches do little to identify any missing cars.
We typically recommend:
Have an individual who is independent of the sales department write down/scan all cars present on the lot. Do not provide an accounting schedule or other listing of inventory to those conducting the physical.
The results of the physical inventory should be reconciled with accounting schedules to identify both vehicles missing from the lot and vehicles missing from the schedules.
A reconciliation summary of the status of all missing units should be properly investigated [...]
Comments Off on The Importance of Monitoring DMS User Profiles
By Sam Flores
How often do you review your company’s DMS user security profiles? You might be surprised at the access some of your employees may have. I have seen cashiers having the ability to void and adjust cash receipts, and accounting clerks with access to payroll information!
There are several reasons why employees could obtain system access to functions or information outside of their scope of work. For example, an employee may have been granted temporary access to perform a vital function in response to another employee calling in sick for the day; or helping cover extra work load during month-end. After the chaos settles, it is very easy to simply forget to change the user’s security profile back to what it originally was!
Many new hire employee profiles are created by simply using an existing employee’s profile and copying the template to a new user ID. New employees often wind up having more [...]
Comments Off on The costly proposition of understaffing the accounting department
By Marilou C. Vroman, CPA, CPE
We often encounter dealers who ask: how many people should we have in the accounting department? As retail automotive advisors, we love to reference NADA, which has a guide of 15 total employees for every one accounting staff. Our answer is typically: NADA guide, plus one.
The accounting department is a cost center which is typically difficult to calculate an ROI. However, in an environment where cash is king and profitability is everything, justifying additional headcount is often frowned upon. Why would we want to add more people?
Accounting staff are often playing catch up, feverishly billing the stack of deals that comes up the last day of every month, preparing commissions, meeting tax deadlines, processing timely payroll and so on. We find the pressure on staff to just “clean” the schedules each month is often so great that thousands of otherwise collectible dollars are written off with little [...]
We’ve discussed in the past that one of the greatest benefits of working at a dealership is having the ability to buy a car that would be considered below market price. However, should selling a car through the dealership also be a perk? We are not talking about traditional traded-in vehicles as part of a normal sale but rather the consignment or pre-trading (a car that is traded in and sold before the new vehicle is acquired) of employee vehicles.
While nowhere as common as employee purchases, we occasionally come across transactions where dealership employees will sell their personal vehicle through the store. When we have come across these transactions, it’s very rare that these transactions have been carried out with the transparency and level of documentation we would expect with an employee or third-party transaction.
For starters, we typically see personnel from the sales department consigning their vehicles. We have yet [...]
I was at a dealership last week to get my car serviced and overheard a customer yelling that she was not pleased with her “complimentary” car wash. Apparently, the carpets were dirty as if they hadn’t been vacuumed. The porter explained that they must have gotten dirty as the car was brought up. “Where are the paper mats?”, she asked.
Many dealers appear to be cutting back on simple things like the paper mats, in hopes the customers will not notice – but they do. The problem is that the dealer is not making money on this complimentary wash. What should be a good gesture in the name of good customer service can become a potential customer complaint.
Every dealership is faced with getting costs under control while still providing the best possible customer care. Fortunately, there are ways for dealers to provide better service without spending a dime. Speaking from [...]
In visiting multiple dealerships I’ve found varying degrees of internal control. Some dealerships are highly intensive with strict protocols, processes and procedures where others are a bit more “relaxed” and “go with the flow.” It should be no surprise that the more relaxed dealership environments are more likely to be subject to fraud than those which are more structured.
One area we see frequent internal control weakness is in the transaction approval process. Dealers hire managers and staff to act on their behalf and in their best interest. Trust is implicit when hiring personnel. That said, would you leave a blank check in the middle of the showroom floor for someone to spend freely without explanation? We see this happen every day.
For example, the used car department sends countless vehicles into the shop to have items repaired or accessories installed. We typically expect to see a vehicle get ready form [...]
Comments Off on Safeguarding your credit card terminals from inappropriate behavior
By Phil Villegas
There are multiple fashions by which individuals can take funds from a dealership. Nearly every position within a dealership has a way of monetizing inappropriate behavior. Most dealerships will attempt to implement safeguards in key areas of risk, particularly over cash, whether it be two signatures on all checks, segregation of duties on deposits, or review of bank reconciliations. However, there is one area of cash controls that I commonly find does not have an adequate level of internal controls, and that is over credit card refunds.
Many dealerships allow for customer credit card refunds on nearly any terminal without any system of internal control. We’ve seen multiple occasions where these credit card terminals have been used to embezzle funds from dealerships by individuals giving refunds on personal cards. In all cases, we found that some basic internal controls could have prevented this from occurring.
To safeguard against credit card refund abuse, [...]
Comments Off on Make a Written Agreement with Yourself to Stay on Point.
By Sam Flores, CPA
Why does it seem like every month the dealership fights to get the month end closed? Have we accounted for every deal? Have all required entries been posted? Did we forget an accrual? Did we reverse last month’s accruals? Did we review our tax liabilities? Has WIP been reconciled? What about those unusual items like LIFO estimates and tax adjustments you only deal with once a year? If that doesn’t sound like your dealership, then Congratulations to you and your team, because the challenge of meeting month end closing deadlines is in full force at most dealerships I have visited.
You know the day to day routine. Get to the office and answer emails, make phone calls and put out fires all day. You eat at your desk while sitting in on a phone conference while trying to review and sign checks – this is the norm!! Finding time to get [...]
Comments Off on What you don’t know about frequent traveler programs may cost you.
By Marilou Vroman, CPA, CFE
As you start reading this Weekly Spiff you might expect the standard discussion about internal controls over travel and entertainment expenses. So here it is: T&E expenses should be submitted for reimbursement on a T&E reimbursement request signed by a manager and supported by detailed receipts in compliance with company policy. Now I am going to take this subject a step further.
As a frequent traveler, I’ve become quite familiar with airline and hotel websites in making my own travel arrangements to visit client dealerships. While making a reservation recently my internal auditor radar picked up on another way an employee could potentially take advantage of a dealer through T&E.
Many people are familiar with the opportunity to earn frequent flyer miles, points or other perks awarded for loyalty, and traditionally, those perks come in the ordinary course of physically flying miles and staying overnight in hotels. What dealers may [...]