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 [...]
Comments Off on Advances in F&I technology should lead to decreased compensation
By Phil Villegas
Over the course of the last several weeks I visited 3 different dealerships that are using docuPAD by Reynolds. For those of you unfamiliar with docuPAD, it is a large screen that sits on an F&I managers desk across from the customer. Per the Reynold’s site “It provides personalized menu presentation, presents forms in an electronic menu format, discloses necessary contract and lease information, and captures files in an electronic deal jacket.” I wouldn’t consider myself a techie, but I certainly appreciate the innovation to improve uniformity and compliance during the presentation of F&I products.
During these visits I’ve inquired of the dealers using the docuPAD about their general thoughts. The dealers generally liked the systems after getting through the initial implementation, but they felt that they have not yet experienced a measurable increase in the F&I PVR. Though, all three commented on the timing and efficiency with which clients are now [...]
Comments Off on If you are not receiving payments for parts scrap, who is?
By Marilou Vroman, CPA, CFE
In recent months we’ve had a lot of activity surrounding the topic of parts obsolescence and scrapping. Perhaps It’s a result of year end parts inventory physicals, where obsolete parts are more likely a topic of conversation among dealership management with the interest to free up some frozen capital and use the cash for fresh parts inventory.
Interestingly, we find highly inconsistent practices from one dealership to the next when it comes to how obsolescence and scrapping of cores and “worthless” stock is handled. What is quite steady however, is the practice of writing off inventory. Interestingly, we find a disconnect between writing off inventory and the ultimate disposition of these items.
Consider a $500 part that has not been receipted or sold for 12 months. By some standards, this part would be deemed obsolete. This part still has some value to someone and there is a good chance of [...]
Comments Off on Dealers should not always rely on reports being printed for them
By Phil Villegas
As internal auditors and forensic accountants, we always approach most operational and accounting reports with a degree of skepticism because we ultimately know the impact that human behavior can potentially have on these reports. To emphasize how important it is for us to know the reports and data we are looking at are pure and unaltered, it is standard protocol for us to require our clients to provide us system access in most of our engagements. We will seldom, if ever, rely solely on client reports if the reports have not been run by one of our associates. While this can often create increased workload for our team, it’s fundamental to what we do.
The recent story below, which is true will highlight the importance of this.
One of our analysts, who was not as well versed with the UCS as he is with other DMS systems, had requested a copy of [...]
Comments Off on Choose to invest in existing operations before investing in others
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 [...]
Comments Off on Mandatory vacations – A good internal control or just textbook?
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.
Comments Off on Image compliance is required, customers liking your facility is optional
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 [...]
Comments Off on Experienced Personnel can Mitigate Cost and Stress at Buy/ Sell Closings
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.