Automotive Updates

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By Phil Villegas

For most of my automotive career I’ve been around dealership buy/sells, first as an employee at a dealership, then for a dealer group that was acquiring stores, and lastly as an advisor to dealers in these transactions.  Over this time, I’ve had the opportunity to witness a wide variety of what makes some deals work and others not so much.

In circumstances where transactions went very well, I’ve found that it’s a progressive evolution of the dealer, where expansion comes on the heels of maximizing current operations.  These dealers have put themselves in a situation where they have generated strong financial performance and developed a deep management bench and look for new stores to provide their capital and team members a platform for continued success.

Which raises the inherit question as to why certain dealers expand when there is still plenty of growth and opportunity at their existing stores.  For most public [...]

By Marilou Vroman, CPA

As controllers, CFOs, and dealership auditors, we have heard it many times before – “Require mandatory vacations as a good form of internal control.”  As with many things in life, the textbook version makes perfect sense to do.  But should this be a part of your dealership’s employee manual?

Mandatory vacation is great from the standpoint of encouraging your employees to take time off to rest, spend time with family and find work-life balance.  Mandatory vacation as an internal control is built on the premise that if an employee is performing certain acts which may be deemed inappropriate, risky or fraudulent, these acts could be discovered or surface while that individual is on vacation.  Essentially, the employee’s daily pattern of behavior gets disrupted.  On the surface, the mandatory vacation makes perfect sense, but as you dig deeper, this policy may not be as effective an internal control as one may think.


By Marilou C. Vroman, CPA, CFE

Over the years, I’ve had the pleasure of visiting hundreds of dealerships, both as a consultant and a client.  It seems image compliance has become a central point for dealers to ensure uniformity in brand presentation, recognition by customers, and at times, to earn incentives from the manufacturers.  While compliance is important, and most often required, how much of that capital investment will yield a direct benefit to your customers?

Interestingly, I find dealers spend millions of dollars to comply but some of the greatest returns on investment come from the smallest of dealership expenditures.  For example, let’s discuss coffee.  We are all familiar with Starbucks, which centers its business around providing coffee and a comfortable and pleasant place for its customers to willingly spend time working, meeting acquaintances, or just relaxing.  In contrast, we’ve all had it, the dealership coffee which tastes as though it should be dispensed [...]

By Phil Villegas

During my career I’ve been part of dozens of dealership buy/sell closings, and they all have a common thread in that each closing is entirely unique yet will undoubtedly have a certain level of stress associated with it.

To put it simply, the largest stressor of any closing is that one or both transacting parties want to screw the other over.  Call it financial discretion or competitive gamesmanship, either way, this approach by many dealers at a closing can often be counter-productive, not to mention very costly if the parties are not properly prepared.

From the calculation of vehicle credits, identification of incentives, validation of fixed assets, valuation of miscellaneous and parts inventories, to the determination of liabilities to existing customers and vehicles that have already been reported as sold, there are several areas for either a buyer or seller to easily be taken advantage of.

Many dealers approach the closing quite [...]

By Marilou Vroman, CPA, CFE

They say pay plans motivate behavior. In dealerships, this is often true but unfortunately, the behavior that is motivated could put the store at risk.  Specifically, the behavior we are referring to today is the practice of “creative discounting”.

Dealership personnel who are responsible for generating sales will typically be motivated to keep gross as high as possible since their pay is often based on a percentage of gross profit. At times, the pressure on departmental or individual performance is so great, employees may seek alternative methods to creatively discount a sale without adversely impacting gross profit and hence, their pay.

For example, a retail vehicle sale could be discounted without impacting gross by removing other amounts that are typically to be collected at the time the sale.  Sales tax is often one of the largest amounts collected, and the tax rate could either be reduced or removed from the [...]

By Phil Villegas

One of the beautiful things about the New Year is that we take it as an opportunity to reset certain aspects of our lives and make a concerted attempt to do better in the year to come.  Whether it’s a commitment to losing weight, quiting smoking, volunteering time, pursue another degree or simply to take that dream vacation, New Year’s resolutions give us a clear starting point from which to embark on enriching our lives.

This should be no different for your dealership and there’s no better time like the New Year to implement or roll out efforts to improve your store. Just like in our individual lives, the prospect and possibilities of the New Year are endless and this is no different for a dealership.  Just like there is not a perfect person, there is not a perfect dealership, there is always room for improvement. Some New Year’s resolutions for your [...]

By Marilou Vroman, CPA

One of the best indicators of a good restaurant is a well-kept, clean and organized kitchen.  Some of the best restaurants are those where you can see the food being cooked with utmost care and concern, the chef directing traffic, an orchestra of gastronomic talent working together to create amazing dishes with the final garnishes so being carefully placed on each plate.  So, as you take time from your busy day to read this, why is this relevant to your dealership?

It’s interesting to me how many dealerships continue to operate with the minimal amount required to meet corporate image requirements, and make little no investment in the non-customer facing areas of the store, such as the accounting office, parts department, and even the service department.  These are the places where dealership employees come to work every day and are expected to be high producers and to be happy and treat [...]

By Ricardo Hernandez

With the end of every period, be it a month, a quarter or a new fiscal year, dealerships should embrace the opportunity to improve their businesses. Ensuring your dealership is fully functioning at its greatest capacity and detecting any errors or discrepancies in a timely manner allows dealers to deter misappropriation and drastically improves performance.

One of the dealership’s most material assets, yet often overlooked from an internal control perspective, is its vehicle inventory. With proper inventory testing procedures, inventory can be accounted for correctly and efficiently. Reviewing inventory schedules and reconciling the GL with a physical count monthly is one of the best ways to detect discrepancies and see where the inventory recording process can be improved.

A simple test can be performed to ensure the schedules are being reviewed correctly. A random selection of five units from the schedule and five alternate units from the lot can be selected for [...]

By Marilou C. Vroman, CPA, CFE

Most dealers are aware of the requirements to file IRS Form 8300 when they receive more than $10,000 in cash for business transactions.  Interestingly, as part of our internal audits we test 8300 compliance and still find even the best run dealerships have 8300 Forms which were either filed late, or not at all.

As a refresher, dealers must report cash payments over $10,000 to the Internal Revenue Service using the Form 8300 within 15 days of the related transaction.  The form must be filed regardless of the nature of the transaction or whether the sale has been completed.  In addition to filing Form 8300 with the IRS, dealers need to furnish to each person whose name has been reported on Form 8300 a written statement of the 8300 filing by January 31 of the year following the transaction.

Failure to file a [...]

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