In another example, an internally created Income Statement showed loan payments as expenses, inventory as cost of sales and BHPH payments received as income while stating that it was accrual basis accounting. These issues required considerable effort to extract an inaccurate and murky picture of his dealership’s financial condition. More importantly, it would appear to a financial institution that both dealerships were ill managed and lacking in professionalism and foundering. A lender reviewing such a financial statement would likely dismiss the dealership without further investigation.
Investing in internal accounting controls and financial reporting pays big dividends.
Dealers that successfully invest in their financial reporting infrastructure receive better interest rates and experience greater lender confidence resulting in reduced compliance cost and quicker turn around on dealer agreement approval or loan requests. Also, the resulting financial reporting provides quality information to restructure debt, reduce overhead, improve revenue and measure performance. Managing your dealership requires much more than merely managing sales.
The infrastructure for good financial reporting is a combination of your DMS, personnel, training and management. Each component is equally important in the delivery of a quality product. The failure of any one component can compromise the end product, your financial statements. Take an objective look at each component of your current financial reporting system to determine their effectiveness. Do your employees know what you expect and therefore how to provide it? Does your DMS have the integration between accounting, sales, and service to achieve your goal? What training may be necessary to enhance your employee’s compliance with your objectives?
Armed with answers to these questions, commit the resources necessary to strengthen your financial reporting infrastructure. Finally, continue to monitor and inspect your financial report products to assure they meet your expectations.
Vol 3, Issue 7