The importance of controls over employee transactions
- The Weekly Spiff!
- Posted by AxioMobile
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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 a few simple internal controls to minimize the risk of foul play:
- Every employee transaction should be reviewed by the departmental manager in which with the employee is transacting. As a sign that the transaction was reviewed, documented management authorization should be clearly present on the supporting documentation for the transaction and stored with the source documents, whether hard copy or scanned.
- Departmental management should have their transactions with the dealership approved by the General Manager. General Managers’ transactions should be approved by the president or owner of the dealership.
- Employees should not be allowed to record their own transactions such as a service advisor booking their own repair order.
- Reimbursements should be reviewed by the controller and have detailed receipts as support.