Automotive Updates

Automotive Consultants, Automotive Dealership Consulting Firm, Enterprise Management Services, Mergers & Acquistions, Litigation Support

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 [...]

By Phil Villegas

With the new year, comes new year’s resolutions. Usually these are personal in nature, looking to improve certain aspects of our lives leading to people setting goals to improve their well-being, whether related to better ourselves physically, emotionally or our financial well-being. The new year provides a clear and definitive break point in which to embrace change, and this is by no means limited to individuals, this can also include our businesses.

If there was one common resolution I would like to see embraced by the general dealership population, it would be that of a 5-day (or better) month-end close. Despite advances in DMS software and business process flow management, one area that I still see as somewhat archaic is the 10 days or more month-end financial statement close. This practice is still very common in many dealerships, with the exception being some mega-dealers and public dealership groups.

I attribute most stores [...]

By Phil Villegas

“They say it has no memory (the Pacific Ocean). That’s where I want to live the rest of my life. A warm place with no memory.” This was a famous line from the movie “The Shawshank Redemption”. It has always reminded me of the attitude of many dealerships towards historical financial statement analysis. For many dealerships, after being provided unit sales count, gross and net profitability, past performance is often forgotten, and the endeavor of the new month is ahead, with no memory of the past.

With the New Year often comes renewed energy for change and improvement. These resolutions should not in any way be limited to ourselves as individuals, but should also be incorporated into our businesses.

One resolution would be the incorporation of detailed financial statement analysis of the dealership.  While the thought of detailed financial analysis is enough to get most dealers, GMs and even Controllers to immediately [...]

By Marilou Vroman, CPA, CFE

As we approach the year end it’s a perfect time to clean up the books and make final adjustments to the dealership P&L and Balance Sheet.  While most of the focus traditionally is what is on the books, extra care should be taken to uncover what is not yet on the books and should be.

As part of our internal audits we typically will review reports of service work in process.  Why are these reports so important?  In a perfect world, these reports contain transactions from the service department or body shop which are not yet complete.  In other words, there is additional labor to be performed or parts to be installed to complete the repair.  Technicians are often paid for their time as accumulated on the repair order and the associated labor and parts sales, gross, and receivable are ultimately recorded when the repair order is closed.  This is [...]

By Phil Villegas

With the Holiday season upon us, many dealerships are planning year-end parties to celebrate the year. These gatherings are great for employee morale and a great opportunity to socialize with other co-workers in a much more relaxed setting. Some dealerships will have their event onsite at the dealership with a pot-luck or barbecue, while others will choose to have their event hosted at an outside location.

Regardless of the location, one practice I saw a few years back from a dealer in their effort to be equitable to all their employee’s hard work was the following:

Early in December, the dealer would send notices to its vendors informing them that in lieu of any holiday gifts or baskets, to either contribute gifts or funds to be used as door prizes during the dealership holiday party. Any gifts or baskets received at the dealership would be kept together to be shared during the [...]

By Marilou Vroman, CPA, CFE

Buying and selling dealership’s is no small task, nor is it something to be taken lightly.  With transactions that can take months to complete and involve tens to hundreds of millions of dollars, both the financial risk and reward can be overwhelming.  Here are some items buyers and sellers should keep in mind as negotiations heat up.

Employee Matters

  • Employee compensation plans – Have there been any recent increases in pay or management?
  • Payroll considerations – Most closings will not occur conveniently at the end of a pay period.
  • Employee Vacations – How are employee vacations and time off accrued and paid?
  • “Sacred Cows” – The Dealer’s daughter or son, the Service Manager’s nephew, etc. Gain an understanding of employee relationships and their roles in the dealership.
  • Non-disclosed, undocumented employee privileges – Certain employees may enjoy peripheral benefits that are not documented part of their pay plans.
  • Loyalty to [...]

By Marilou Vroman, CPA, CFE

You may be aware there are ways to monitor the web for content such as “Google Alerts.” This service is an easy way to have relevant news delivered to your in-box.  As a forensic accountant and a passion for dealership internal controls, one of my alerts is set up to provide articles about dealership fraud or embezzlement.  It seems almost every other day I receive an article about another dealership that has been taken advantage of by an employee.  After reading many of these articles, I find myself thinking, this could have completely been prevented with the simplest of internal controls.

Just yesterday I read an article about a Toyota dealership in which a General Manager perpetrated a fraud scheme where checks were diverted for personal use.  According to the article, the General Manager told his dealership employees to make checks in the thousands of dollars payable to a fictitious [...]

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