Comments Off on Thinking about applying for an Open Point (Part 1)?
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:
Comments Off on Fraud Prevention Tips for your Dealership
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 [...]
Comments Off on Implementing strong guidelines in the parts department to prevent theft.
By Jorge Arrieta
In any dealership, parts may be considered assets at the highest risk. Why? Because parts theft could very easily remain undetected since few people monitor parts activity besides parts managers. Between the high transaction volume, frequently changing part numbers, returns, new vendors, and special orders, it can be a challenge to know everything that has been happening in the parts department.
By implementing a daily bin count and an annual physical inventory, dealers and controllers can have more control over their parts inventory.
When performing a daily bin count, one should select a few high risk parts from the parts pad and verify they are still in inventory. Some examples of parts to select include those that have a history of plus/minus adjustments, scrapped parts, and parts sold for low or negative gross profit on parts tickets or repair orders.
We recommend having an individual from the accounting office trained on the [...]
Comments Off on Charging Market Rent on Your Dealership Can Save You Money and Prevent Unwanted Surprises
By Phil Villegas
More often than not we come across stores that are showing rent expense that is far below what the dealership would pay in the open market. For the most part, this happens because the rent has not been reviewed or adjusted for many years.
However, with increasing industry and commercial property values in many areas, we recommend adjusting the rent charged to your dealerships to market. This may actually save you money in stores where the General Manager, Controller or other personnel have a pay-plan component that is based off of the bottom line. Having the proper rent amount also provides for a financial statement that is reflective of the current market. We have seen dealers severely disappointed when selling their stores to find out their perceived profitability dropped because of a market rent adjustment.
An easy way to determine fair market rent is to take your most recent appraisal, or come [...]
Now that April is behind us and your corporate returns have either been filed or extended, it’s a great time to look at the new tax plan released last Wednesday by the Trump administration. The plan would have broad impacts on the auto industry, from global auto manufacturers to mom-and-pop car dealerships.
With the new Trump tax reform, most businesses with high tax rates seem to be finally getting a break. The plan would cut the 35% corporate income tax to 15% for all businesses. While this sounds like it’s a dream come true, this tax cut comes with many reductions or eliminations to corporate deductions that a business may currently take advantage of.
The plan imposes a one-time 10% tax rate on corporate cash held overseas as a way to make America’s corporate tax globally competitive, avoid tax maneuvers and encourage investors to put their money to work in America [...]
Comments Off on The Problem with Parts Inventory Adjustments
By Mercedes Hendricks, CPA
The Parts Management Report is full of great information…if you know how to read it! The details that comprise the DMS’ parts inventory management report are extensive and, while difficult to navigate, can tell you a lot about how well the parts manager is controlling the inventory.
The parts pad is the perpetual parts inventory record. The inventory management report provides a record of parts ordered, stocked, invoiced, sold, returned, and yes, adjusted. Why would there be adjustments in the pad? Often what happens is a parts manager or employee performs a bin check and notices a difference between the parts physically on hand and the pad count. This difference is then manually adjusted to reflect the physical bin count.
Inventory adjustments may be done with perfectly good intentions. The problem is that if these differences are not thoroughly investigated before being adjusted in the pad, even the best of intentions [...]
Comments Off on Bonus Depreciation can reduce your 2016 taxable income for Qualified Improvements to your Dealership
By Dan Flugrath, CPA
The Protecting Americans from Tax Hikes Act (PATH ACT) added a new provision for Bonus Depreciation regarding Qualified Improvement Property (“QIP”). The significant change is the dealership or dealership owners or principals can own the premises.
QIP are improvements to the interior portion of a building that is non-residential property that is placed in service after the date the building was placed in service. There are 3 improvements which do not qualify for this expensing election:
Enlargement of building
Any elevator or escalator improvement
Internal structural framework of building
Prior to the PATH Act, Qualified Leasehold Improvement Property (“QLIP”), improvements to leased property that was at least 3 years old, that was not leased to a related party and met the definition of Improvements similar to the QIP rules above was eligible for bonus depreciation.
The difference between the QIP and the QLIP rules are:
Comments Off on Respect your slush funds…or they may just disappear!
By Mercedes Hendricks, CPA
“Save it for a rainy day” – that was a phrase my dad would say when I received some money as a kid that I wasn’t expecting. This saying has a positive connotation, right? Receive some money today, put it in the bank and save it for when you need it. In dealer’s terms, I am referring to factory incentives, sales packs and other similar items where you have recorded a reserve instead of recognizing the income, even though it has been earned. This is a philosophy that many of my dealership clients use in one way or another.
While a common practice, interestingly, we have seen first-hand how this approach can get dealers into trouble. The problem with “rainy day” reserves is that there are rarely sufficient controls in place over how they are to be used, which can lead to errors, or worse, manipulation. If you are going to [...]
Comments Off on Will the adoption of LIFO on your 2016 return be beneficial to your dealership?
By Daniel Flugrath, CPA, CFP
Most likely the answer to this question is “yes”. Many economists are stressing caution regarding a warming economy, along with the anticipated interest rate increase expressed by the voting members of federal governors who meet next on March 15, 2017. If 2% inflation occurs, applying 2% to $1 million of beginning inventory could yield as much as a $20,000 deduction (assuming a consistent model mix). Adopting LIFO is done by filing the IRS form 970 with your dealership’s annual income tax return. The election does NOT require IRS approval. There are three different LIFO methods that are widely used by dealerships: Alternative LIFO, Vehicle Pool Method, and IPIC.
Generally, under the Alternative LIFO for new vehicles, for each separate trade or business, all new cars, including those used as demonstrators, must be included in one dollar-value LIFO pool, regardless of manufacturer; and all new light-duty trucks, including those used as [...]
Comments Off on Simple Yet Effective Procedures for Accounting to Monitor Fixed Operations
By Mercedes Hendricks, CPA
I spoke with a Controller recently who asked me how she could better monitor the parts and service departments. This Controller understands financial statements better than anyone, but when it comes to fixed operations she’ll admit she struggles with obtaining and interpreting data in order to ask effective questions and hold the managers accountable. Here are three basic procedures accounting can perform that will not only enhance the understanding of parts and service operations, but will also let the managers know they are being watched.
Run the open RO report and have one of the accounting members go to the service department and locate each of the vehicles on the report. Since RO’s should be closed when vehicles are returned to customers who have paid their portion of the services, all of the vehicles on the open RO report should be physically present.