5 Profit-Draining Dealership Accounting Practices

The dealership office is rarely viewed as a profit center. Although your accounting staff do not generate revenue like your sales and service staff do, what happens in your office has a huge impact on the profitability of your business.

If your office isn’t being managed efficiently, your money isn’t being managed efficiently. As a former corporate controller of a large New York dealership and a frequent visitor to many of our dealership clients, I see firsthand the most common practices that occur in accounting offices that have a negative impact on dealership profits.

1. Manual Data Entry and Reporting

You have a dealer management system which the accounting staff is supposed to use, but you’d be surprised how many processes are being done manually. I go out on a lot of installations with our team and I’m constantly amazed at how many processes are still being done “old school.”

For example, last year I was at a dealership where the accounting staff were still using stock books, or long books. These were no longer in use when I worked at a dealership many years ago, so it was shocking to see the staff entering data into this stock book. The reason why is because the office manager had done it that way for 30 years and didn’t want to change.

Ask your office manager or accounting staff to create lists of all processes and reports that require manual data entry, mandate a change, and gauge progress. If switching to an all-digital process is challenging, ensure that your staff have the resources necessary to make the changes.

2. Inadequately Trained Employees

Often when an employee is hired, they are trained on the bare minimum of how to do their job and then learn on an as-needed basis. Sometimes people are hired without an adequate accounting background. In one dealership I know of, the dealer brought in his daughter and gave her a position in accounting, even though she didn’t know what a debit or a credit was.

Without adequate training and oversight, employees can cause big problems. Deals might be posted incorrectly, receivables might not be collected, and gross profits might be represented.

Proper training is critical to run an efficient office. But it often doesn’t happen. Everyone is too busy and the training gets pushed off to “someday.” To ensure it happens, senior management and principals should get involved and make it a priority.

3. Senior Management Unfamiliar With Accounting Functions

Principals, general managers, and other senior management are often not familiar with accounting and how to manage the accounting side of the business, because they came up through sales.

Knowing how to read reports is not the same as having the ability to manage people, processes, and a department. This ignorance can make your dealership vulnerable to employee theft, and sometimes theft can go on for years before it’s discovered.

Make sure that your senior management team has some familiarity with accounting functions and management; if they don’t, provide them with proper training.

When you’re not reviewing reconciliations on a regular basis, errors and fraud can go undetected.

4. Insufficient Reconciliations

It’s very common for accounting personnel to become so bogged down with their daily tasks that they get behind on reconciling critical accounts. Employee turnover and undertrained staff can compound the problem, further deprioritizing reconciliations.

It’s really important to pay close attention to monthly reconciliations, including bank reconciliations, inventory reconciliations, and vendor reconciliations. When you’re not reviewing reconciliations on a regular basis, errors and fraud can go undetected, and poor management decisions are made based on the wrong data.

5. Overworked and Underappreciated

At any given moment, your accounting staff could be doing their actual jobs or secretarial work —accounting staff are often asked to “fill in” for a receptionist who’s out, order lunches for other departments, or do a favor for a manager.

Other non-mission critical work could include:

• Financial contracts.
• Title work including tracking down missing titles.
• Compliance reporting.
• Fraud prevention.
• Pulling reports for management.
• Dealing with customer service issues.
• Dealing with vendor issues.
• Handling money.
• Ensuring all deal paperwork is correct so sales go through.
• Drop everything to help other employees and managers solve problems.
• Fix other people’s mistakes.

When your staff is overworked, every day is just putting out fires. This leads to employees becoming demotivated. Negative attitudes hurt your business and bottom line; for example, leaving factory incentives or receivables uncollected, simply because an employee is too overworked and doesn’t care about your dealership’s bottom line.

Knowing where problems frequently occur makes it easy to take a peek inside your accounting office and start asking questions. If these profit-killing practices are happening in your dealership, partner with team members and outside vendors to assess the situation and solve the problems.

Melissa Maldonado is director of customer support for Auto/Mate Dealership Systems. She is an NADA Dealer Academy graduate and has held executive positions at Nissan stores in New York.