Article

Columnar Pads Or Computerized Accounting

September 2006, Auto Dealer Today - WebXclusive

by David Keller, CPA, CFE - Also by this author

The independent dealer has many choices when deciding what their accounting department should look like. Most dealers start out small with a minimal accounting staff usually their spouse or a family member employed on a part time basis. As the dealership grows, the need for additional office and accounting help increases along with increased number of hours to complete the job.
My parents started their used dealership with this same format in 1972 and existed that way until 1992, when they bought the Chevrolet Chrysler Dodge franchises and re-located them next to their used vehicle facility. Their need for outside financing for their growing inventory and sales in the mid 1980’s required them to submit financial information about their business to the bank.
 
At that time, fresh out of college with an accounting degree, I got involved in the financial side of their business preparing monthly financial statements on a computer the size of a suitcase. The books were still kept manually by my mom on columnar sheets of accounting paper. Those column totals for the month were entered into software and financial statements were produced from them. Weekly payroll, W-2’s and other payroll reports were calculated manually.
My dad prepared his used vehicle Inventory sheet on loose-leaf paper and kept track of reconditioning on index cards or in his head. He manually re-wrote it each week. They managed their dealership like many still do, by reviewing their cash balance on a daily basis to see if they could buy more cars and still pay their bills.
 
Seems very primitive now, doesn’t it? Is this some version of your accounting department? I am not demeaning anyone by saying this method doesn’t work. It does, but it is also very time consuming and can be costly in many ways. Yes, you can save money by not having the most current or “best” version of accounting software and you may also save money by not hiring the most qualified person to manage the accounting at your store. You can get by for now, but may not be able to grow and effectively manage your business as your volume increases.
 
Your accounting department should be efficient and staffed well enough to gather all of the different accounting transactions, compile them into something that resembles a financial statement and makes some business sense to you and possibly your banker. If you are not accomplishing this, you need to review how you are staffing the accounting department, what you are using to record your transactions, how timely you can receive the month end information and how accurately you think it resembles your business that month. Also, you should not overlook the ability to react to your current financial statements in a timely manner to improve next month’s activity.
 
Accounting has progressed rapidly in the past five years. Accounting software comes in every variety and price. Dealers are using many different types of software to generate their accounting transactions. When speaking with dealers about the various types of accounting, front end F & I, service and parts, customer followup and retention software they are currently using, I get dizzy. Often when I review their accounting records, a disaster appears to have happened in their accounting department and financial information preparation. When a banker reviews these financial statements, they shake their head and wonder how some dealers have made it as far as they have in this business. The dealer has no idea if they have made a profit or incurred a loss. The banker realizes the dealership probably exists only because it currently has enough cash to buy some cars and pay their bills. This means there are many dealerships out there that could use additional accounting help and training in the basics of bookkeeping. They could also use additional training in how to use their accounting software to the fullest.
 
Improving your accounting department can be manageable. Classes are offered by local high schools and colleges, technical schools, and from associations such as NIADA. Ask your current accountant or bookkeeping firm to train your personnel in the basics of accounting theory, such as adjusting and reconciling your accounting records. The biggest obstacle to overcome is the idea that your accounting records are OK, and if you sell more cars everything will straighten itself out. You may survive for the short term, but your future growth and profitability depends on accurate accounting records and how you react to them.
 
My parents were no different than many independent dealers operating today. Many would profit from improved accounting records that are accurate, timely and tell the true story of the financial condition of their dealership. Your accounting department needs to be able to recognize when there is a problem with a general ledger balance. Additionally they should know how to correct the errors and record the transactions correctly the next time.
 
It’s not too late to get your accounting department and records in order! Don’t let the dealer down the street pass you by because they were able to obtain additional financing for future growth. Feel free to email me any questions you may have regarding improving your accounting department.
 
This article is dedicated to my father, Eugene Keller, a man who made the car business his life. He was an independent dealer for 20 years and a new franchise dealer for another 13 years, who passed away quietly from cancer last August at home with his family by his side.
 
Vol 3, Issue 6

Your Comment

Please note that comments may be moderated. 
Leave this field empty:
Your Name:  
Your Email:  

Blog

On-the-Point

Jim Ziegler
Fasten Those Seatbelts

By Jim Ziegler
With a major slowdown imminent, Da Man says it’s time to ditch those new-age theories and get back to the basics.

Objects in the Rearview Mirror

By Jim Ziegler
The past is right behind us and the future is coming fast. The Alpha Dawg plots a course for your store’s success and shares advice for Elon Musk, Johan de Nysschen, and pre-owned managers.

The Big Talent Drain

By Jim Ziegler

A Faster Horse

By Jim Ziegler

Opening Observations

Over the Curb