Category: The Weekly Spiff!

Posts related to The Weekly Spiff!

By Phil Villegas

In continuing my theme of focusing on the fundamentals, I thought I’d focus on one of the most basic internal controls that is overlooked or not taken as seriously as it should, and that is the taking of vehicle physical inventories.  For most dealerships this is the single largest asset on the books, and unlike real estate and Blue Sky, these asset can actually be easily moved.  Time and time again when we inspect dealership’s physical inventory counts we are left concerned with the thoroughness and seriousness with which they are completed.  Many stores will not complete new car inventories since they will say the floorplan company does that or many accounting offices will simply say the sales department does that.

In our opinion, the accounting department is not doing its job if it does not take full ownership of the vehicle inventory process.  Deferring this key control to a floor plan [...]

By Marilou Vroman, CPA, CFE

CSI, SSI, Customer Satisfaction… you hear about it all the time and know how vital these terms are for dealership success and profitability.   How each dealership approaches its CSI is very different.  In visiting many stores, and being a dealership client myself, I’ve observed many different practices in place and how these potentially impact customer satisfaction.   Interestingly in the most complex CSI initiatives, there is one simple thing that your employees can change today that can easily increase client satisfaction.

While recently visiting one of my clients for internal audit field work I took notice to how the employees of the dealership were treating their guests, and me.  Believe it or not, auditors don’t always receive a warm welcome in dealerships, in fact, some auditors are intentionally placed an uncomfortable work space, such as a cold room with no windows and employees are instructed to not provide any more information [...]

By Eduardo Hernandez

One of the controls in the sales department that every dealership should have and enforce is management review and signoff on employee deals. Although there should be a certain level of trust in a dealership, it never hurts to “cross your t’s and dot your i’s.”

Some of the items that we recommend reviewing include:

  • Make sure all required deal documents are present and signed by the employee.
  • Ensure the deal is in compliance with any rules the dealership or group has for employee deals.
  • Look over the history of the vehicle being purchased.
    • See if the ACV appears reasonable and if there were any recent write-downs.
    • Check to see if the employee appraised the vehicle they are attempting to purchase.
  • Confirm the vehicle qualifies for all the incentives considered in the deal.
  • If a vehicle is being traded-in, verify the ACV is appropriate.
    • Make sure the [...]

By Phil Villegas

I like to compare embezzlements to plane crashes.  When a plane crashes it is usually not the result of one system breakdown, but rather a series of simultaneous breakdowns; a convergence of elements that end in disaster.  Perhaps the only difference when compared to dealership embezzlement is the convergence of elements is extended over a period of time, not a single day.

There is one vital internal control in protecting dealerships from embezzlement that has been tail spinning into decline because of advancements in technologies and that’s the review of Cancelled Check.  15 years ago it was commonplace to receive a huge envelope every month with all the cancelled checks, nowadays this is considered archaic, with cancelled checks only being available to be viewed online.  This problem has led to Owners, GMs and Auditors not routinely reviewing cancelled checks.  Keep in mind, a proper review of a cancelled [...]

By Marilou Vroman, CPA, CFE

In many years working as a dealership controller and as an internal auditor, I’ve unfortunately seen frequent cases where employees have taken excessive advantage of a dealership’s travel and entertainment policy.  Travel and entertainment normally are common business expenses for dealers, such meetings with manufacturers, conferences, technician training, and travel between multiple rooftops.  While travel may be viewed as an inconvenience to some employees, others view travel and entertainment as an opportunity for enrichment.  The question becomes, at what point do business travel expenses go from necessary and reasonable to an abuse of privilege and self-enrichment at the detriment of the dealer?

You’ve probably seen it or even experienced it – lavish dinners with expensive cocktails and wine, the five-star hotel room and “resort” fees to cover the golf cart and 18 holes, the first-class tickets to Europe, an occasional spa treatment or luxury rental cars.  Some dealers may choose [...]

With Hurricane Irma on course to hit some part of the U.S. within a few days, this is a good time to take some steps that may minimize disruption in the event you are in the unfortunate path of the storm.  While each dealership will have its own unique facility and vehicle preparation steps, this Weekly Spiff is to highlight some of the administrative steps that could get overlooked in the process.

A. Update all employee contact information with latest mobile phone number.

a. Make sure all employees are assigned to a key Departmental Manager for notifications and updates.

B. Take a copy of your dealership’s insurance information and refresh your understanding of your business interruption, windstorm and flood coverage. Make sure to have the proper insurance claim phone numbers to contact and ensure any premiums which are due have been paid.

C. Have check stock that can be hand-written in the event of extended [...]

By Marilou Vroman, CPA, CFE

With the topic of healthcare so frequently in the news and topics of discussion, I couldn’t help but notice how people feel about preventive care is quite like how some dealers feel about internal audits.

I recently visited the doctor for an annual physical and went through the usual tests including EKG, blood work and X-rays to help reveal any underlying health issues I may not be aware of.  I felt perfectly fine during the visit, and all the outward signs of being healthy were present.  The test results fortunately revealed everything was just fine. So, if we appear to be healthy on the outside, or our last physical was good, why do we keep going through the process of missing time from work or family, the unpleasantness of medical testing, and paying for those surprise lab bills that are not covered by insurance?  Put simply, it’s for peace of [...]

By Eduardo Hernandez

One of the perks of working for a dealership is (hopefully) getting a good deal when it’s time to buy or lease a vehicle. Whether it’s applying a legitimate employee manufacturer incentive(s) and/or structuring an aggressive deal, there are many ways to get a good price. Regrettably, there will be employees that are going to try to do everything to get an even better deal and it’s something we’ve seen happen time and time again. Those on the frontlines of the dealership, like salespeople, F&I managers, or sales managers, are in the best position to take advantage of the dealership for personal gain.

Recently during an audit, we found a single journal entry to write a vehicle down by almost 20% to “market value,” that was requested and approved by a sales manager. It turned out, this vehicle originally belonged to that same sales manager who sold the vehicle to the dealership [...]

By Phil Villegas

I’ve noticed certain reoccurring patterns in many of the dealerships I’ve had the opportunity to visit. There always seems to be that one particular, heavily relied upon individual who tackles certain tasks. No one else would even dare to complete the tasks and responsibilities of this individual if they went on vacation. Instead, they would opt to let the work sit and wait for the employee to return. While under many occasions this can be completely innocent with no ill will, more often than not, there can be major risks associated with this. Many of the cases of embezzlements I’ve encountered have often been linked to job responsibilities that are specific to one employee. The dealer’s losses become compounded and can extend for longer periods of time because no one checked or picked up the tasks of this individual.

We discovered an instance of this during one of our internal audits. A [...]

By Phil Villegas

Is your dealership properly handling exports transactions in accordance with state and federal laws?

In our Axiom Analysis, we often discover weaknesses in vehicle export processes and documentation. If an international customer purchases a vehicle with the intent to export, the customer is not exempt from sales tax unless he or she provides proper documentation.

If a customer intends to export a vehicle, the dealership has the responsibility to prevent the customer from driving the vehicle off the lot by issuing a temporary tag. Direct exports are typically not charged sales tax and are not registered. In turn, typical export rules indicate the vehicle must be paid in full, an affidavit that the vehicle won’t be driven in the selling dealer’s state must be signed, and a bill of lading must be collected for the deal jacket. In addition, we often recommend new vehicles be titled to prevent a MSO from being [...]

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