Tracking The New Year - Part Two

In the last issue, I discussed how you can more easily track your balance sheet accounts using various types of schedule setups along with separating accounts. In this issue I am going to review various income statement accounts and what you can do to make your life much easier.

Starting with sales and cost of sales accounts, the manufacturer normally decides which ones you need by the different models represented by your franchises. Your DMS vendor has normally pre-loaded these accounts into your system. You may not use them all, such as fleet accounts, but they should already be there. Where I find a lot of inefficiencies in posting car deals are the setups which are built into your DMS system. There are normally some ways to improve the setup of the F&I fields which push the information from their department on a booked deal to the accounting office, where it must be posted by checking to make sure the correct accounts are being used for the different types of sales within the car deal.

On some systems you can enter the exact account numbers ahead of time in the setups which then in the future use previous transactions to post the next deals correctly. Other systems have an intelligent learning system which knows how you posted this type of activity before and then uses it in future deals to reduce the number of posting errors you may encounter. Some systems complete part of the account number, but you must complete the rest. On other systems, you have to enter the entire account number. Whatever system you have, please take advantage of the additional description fields on the sales and cost of sales accounts and enter the customer’s name and stock number, as the stock number may not be the reference number of the transaction. Some systems may automatically enter part or all of this information for you or you can check the setup of F&I fields and see if they can be defaulted in.

Dealer trade sales are tracked normally by the net difference of the trade being posted to a specific other income account. By the way, there is no such thing as a dealer trade. When was the last time you saw an invoice of a vehicle sold to another dealer with the trade-in fields completed? I have never seen one. A dealer trade is really two separate transactions of a sale and a purchase on two separate invoices, one from each dealer. With this in mind, why are you netting a wholesale vehicle transaction into one net account? You don’t do this with your used wholesale activity. I would recommend you set up in other income (except for Ford dealers, then it would be in the normal sales account number area) a sale and cost of sale account for new car wholesale sales and the same accounts for new truck wholesale sales. Post the activity of “dealer trades” as a true sale, so you can easily see what volume of vehicles you had to purchase from other dealers rather than the factory.

When posting the sales of vehicles, you can use separate journal sources in most systems to separate the different types of sales, such as retail and wholesale. Set up a separate sales journal source for new vehicle wholesale sales. You have one for used, why not for new wholesale? When you purchase the wholesale vehicles from another dealer, you could use a separate source journal for these, whether you write a check or use a paper trade with your common floorplan source. When you use both a separate source journal for purchases and sales of the new wholesale vehicles, you can easily run a report of what vehicles you sold and which ones you purchased. This may help you improve your ordering methods in the future. Some dealers who have set these up are tracking 25 to 35 percent of their normal new retail unit sales in wholesale new sales to other dealers.

I would set up as many different source journals as possible to completely separate the various types of deposits and disbursement transactions. For example, when posting cash deposit activity, you could have a separate source for each section of your bank statement activity. This would make it easier when you reconcile your bank statement as you could sort the transactions, if needed, to match up with the bank statement activity. On disbursements, you would have separate sources for checks, ACH, wires, etc.

When posting to your various expense accounts you should again take advantage of the additional description fields offered by your DMS system to enter the vendor name and a short description of what you purchased. When you have to print a detail of the account to see why it is too high or low at month end, it will make your life much easier as you shouldn’t have to manually detail out this information for the manager or dealer who may be requesting it. On some DMS systems you can make data entry be required for the description fields.

You could also break down the factory chart of accounts into more detail. One example is advertising. You could set up different expense account series for the different types of advertising, such as newspaper, TV/cable, radio, direct mail, billboards, coupons, etc. This would give you valuable information in the future when comparing the expenses for each month or year side-by-side on a trend report. This will quickly enable you to effectively categorize your advertising expenses, realize how much you have spent in the different areas and whether it makes sense in the future.

On a final note, please separate your other income and expense accounts into the types of transactions you have. Examples are processing fees, incentive income, objective income, EBE income, packs and other types of reserve income, interest income, etc. Use the same methodology to separate other deduction type accounts. If you don’t do this, we (your accountants) will have to hassle you to find what is in this huge number at yearend, so we can better classify it for the tax return and/or financial statement preparation.

Hopefully you can utilize some of these suggestions. It will make your life much easier.

Vol. 9, Issue 3