Improving internal controls over your vehicle inventory
- The Weekly Spiff!
- Posted by AxioMobile
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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 testing by an individual outside of the sales department. Each unit which is present on the lot should be verified as recorded on an inventory schedule, and conversely, each unit recorded on the schedule is present on the lot. This small but important test in addition to a regularly scheduled full physical count and reconciliation will help provide additional assurance that your inventory counts are being done correctly.
Implementing these changes will reduce the risk of misappropriation and creates stronger internal control over vehicle inventory. Like all changes to procedures, it may take a few reporting periods to successfully implement these changes, but will ultimately be a good return on the time invested in the end.