Category: The Weekly Spiff!

Posts related to The Weekly Spiff!

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 [...]

By Eduardo Hernandez

Employee transactions are likely one of the riskiest recurring transactions a dealership will face on a recurring basis. Whether it’s a vehicle sale, repairs, parts sales or an expense reimbursement to an employee, there are various ways where an unscrupulous employee could try to take advantage of the dealership.

Some of the creative things we’ve seen employees do include:

  • Buying a popular trade at cost (usurping the dealership of an opportunity to make gross).
  • Trading a vehicle back to the dealership for more than what they purchased the vehicle for.
  • Power booking accessories into a finance contract and keeping the extra proceeds from the funding.
  • Giving themselves generous discounts on service and parts where the store loses money.
  • Leaving a personal repair order or parts ticket open and neglecting to pay for an extended period.
  • Duplicating reimbursements or submitting receipts for non-business transactions.

As a general note, we recommend implementing [...]

By Marilou Vroman, CPA, CFE

Remember a time when journal entries were hand written on green ledger paper and were reviewed and approved by the controller prior to posting?  In a time when our DMS systems have enabled ease of journal adjustments through source journals we have found more opportunity for theft and income manipulation than ever before.

During our internal audits we often review adjusting journal entries very closely; we have found there is an inverse relationship between the cleanliness and “health” of a dealers financial records and the volume of journal entry adjustments that occur within the dealers books.  In a perfect world, there would be very few adjustments since every transaction would be recorded correctly up front.  Since we are not in a perfect world, it’s important to know who is adjusting the books, why those adjustments are being made and whether the adjustments have been properly approved by department management.

In [...]

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 [...]

By Marilou Vroman, CPA

Buying a dealership can be an exciting and stressful proposition.  Working with manufacturers, lenders, attorneys and accountants all in the interest of getting past the closing table to run your new automotive retail venture.  Many of the hurdles of acquiring a dealership can be overcome, but one area that can create a significant amount of stress between buyer and seller is negotiation and interpretation of the asset purchase agreement (“APA”) which governs the sale of the dealership assets.

For those contemplating their first acquisition, the APA will typically highlight what will be purchased (e.g. inventories, fixed assets, goodwill etc.) and the method of valuation of each type of asset.  The interpretation of the “what is being sold and for how much” can put a dealership transaction at risk if left until the date of closing to be discussed between buyer and seller.  For example, an APA will typically include new vehicle [...]

By Eduardo Hernandez

One critical aspect of the open point application process is explaining to the manufacturer why you, the dealer candidate, are the best candidate for the proposed market.  This is most often demonstrated with a business plan.

Well-placed pictures can help paint an illustration in the minds of the executives reading your business plan as to why you are the best candidate. There will be dozens of qualified applicants and visuals can help illicit the emotional response that makes the difference between being awarded the open point or going home empty handed after spending countless resources on the application. Even if you aren’t considering applying for an open point soon, taking pictures of key events can help you in the event  you decide to apply so you aren’t scrambling for pictures at the last minute or worse, using stock photos.

Generally speaking, try to always take high quality pictures. It’s very disappointing when [...]

By Eduardo Hernandez

Whether you’re an experienced dealer with multiple franchises, a rising sales manager, or anything in between – has the thought of applying for an open point ever crossed your mind? Investing some time to keep your resume updated can save you hours of headaches if you ever do decide to apply for an open point.

Many, if not all, applications will ask you to summarize various aspects of your resume on the application. By keeping your resume up to date, it will make filling out the application and creating a business plan that much easier because you would be keeping many of the items manufacturers ask about in one place and current. Some of the items we’ve seen manufacturers ask about include: employment history, awards, community involvement, and formal education.  Take credit when credit is due, and here are some tips to help you:

  • More importantly than keeping track of your [...]

By Marilou Vroman, CPA

As you may know firsthand, many automotive dealers are required to have regular financial statement audits or reviews performed to meet lender requirements, or at times, for piece of mind.  While audits and reviews are important for third parties relying on the financial statements, all too often we find some dealers believe an external financial statement audit or review is also designed to detect fraud.  While certain procedures may lead an auditor to detect fraud, procedurally, there are limitations such as materiality thresholds that may prevent inappropriate activities from being detected.

For those familiar with fraudster’s tendencies, embezzlements typically begin at small dollar amounts to “test the waters” and to identify if a scheme can be perpetrated without detection.  Once the perpetrator has been successful with their initial scheme, the tendency is to increase the reward while the perceived level of risk declines.  For example, a salesperson may collect $500 cash [...]

By Mercedes Hendricks, CPA

We all know and understand the fraud triangle; that fraud most often occurs when individuals have external financial pressures, are presented with opportunities to commit fraud, and can rationalize their behavior.  While you may not be able to influence financial pressures or rationalization, you can minimize the opportunities by implementing preventative internal controls.

What do these internal controls look like?

  • A no-tolerance culture for fraud. Sure, no one will say that they tolerate fraud.  But take a close look at the culture of your dealership.  Do you talk about fraud and communicate your no-tolerance policy?  Do your leaders follow that policy and model it for the rest of the employees?  Creating an environment where integrity is the trump card is a great way to prevent fraud.
  • Require individuals with access to the DMS to take vacations, and have their duties covered by another trained employee during their absence.  You might [...]
Back to top