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It’s not only about identifying vehicles on the schedules or floorplan

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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 and signed off by a sales manager and the controller.

In our experience, most dealerships conducting physical inventories are not concerned with cars that are present but not in accounting records. Larger issues can often be traced from taking further steps in identifying these units.  Here are some examples of vehicles not in accounting records:

  • Wholesale or auction purchases where paperwork has not been turned into accounting.
  • Trade-in vehicles on deals that have not been recorded in the DMS.
  • Previously owned inventory that was returned and the unwound deal is yet to be submitted to accounting.
  • Dealer trades not submitted to accounting.

The early identification of these types of transactions can go a long way in detecting and deterring any ill intended behavior.

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