Year-end at a dealership is undoubtedly the most stressful time period the accounting office experiences. In addition to preparing 1099's, W-2's, calculating bonuses, quarterly payroll taxes and all of the other tasks in completing a normal month-end, the office is faced with preparing for their CPA firm's fieldwork.

Many office managers find themselves unprepared for their CPA due to the day to day demands of the dealership as well as not knowing what the CPA needs when they arrive.

The office staff usually focuses on reconciling scheduled accounts and assuring that the schedules are clean. Uncollectible receivables are written off, and bank reconciliations are completed in preparation for year-end.
There are several accounts however that often get overlooked. These accounts are usually unscheduled and are not derived from a vehicle sale. Officer note receivables and payables are often overlooked in the year-end preparation. Often these accounts aren't scheduled, but your accountant will likely ask for twelve months of detail. If you have more than one stockholder and you are using the same unscheduled account, this could be a tedious project.

Work in progress is often an overlooked account that is in need of an adjustment. Take extra care that you adjust this account to actual at year-end.

Prepaid accounts that are not scheduled should be reconciled at year-end. For instance, if you posted $24,000 to prepaid insurance in June, then you should verify that the account has a $12,000 balance in December. Also, be prepared to give your accountant details of how much was paid, to whom, and what was purchased. Prepaid taxes should also tie to all federal and state estimates paid for the year and any uncollected overpayment from the prior year. Photocopy all wire transfers and check payments to support the account balances.

One of the most time consuming processes during fieldwork is fixed assets. There are several steps that can be taken to minimize the time spent on these accounts during fieldwork. First, the 12-month detail for these accounts should be printed. The journal entries should be scanned with the intention of noting several circumstances. The accounts should be reviewed to not only find posting errors, but to find any asset under $100 that was not in conjunction with other purchases.

For instance, if a construction project was completed during the year, small items combined might be material, however assets under $100 purchased alone should be expensed. If a construction project has been started but is not completed at year-end, all related expenses should be reclassified to a prepaid account or a construction in progress account. These assets will be depreciated after the project is completed. It can also be advantageous to have your accountant perform a cost component study if the project is significant.

Next, the journal entry detail should be reviewed to find any partial payments of an asset. For example, if a new sign has been purchased but only half of the cost has been paid, it should either be reclassified to a prepaid account or the remaining amount due should be set up in accounts payable. After these accounts have been reconciled, make copies of all purchases for your accountant.

Last, but not least, are disposals. For any item, whether it was abandoned or sold, your accountant will need to know the sale or abandonment date and the sale price or cost used to place it into inventory.

Throughout the year, most every accrued account accumulates a difference. A good rule of thumb is that the accounts should be adjusted to what was paid in the month proceeding year-end. For instance, accrued payroll tax accounts should tie to the payroll payments and quarterly reports. Accrued 401k should tie to what was paid in the proceeding month, as well as accrued interest.

Any other accrued accounts that are not scheduled — such as real estate taxes — should be reconciled at year-end. A description and amount making up any unscheduled accrued other account needs to be provided to your accountant.

Debt is often misclassified on the balance sheet and not adjusted to actual at year-end. Lines of credit are usually considered a current liability. Even if the agreement will be renewed, the contract often has a maturity date of one year or less. Your accountant will need copies of any line of credit agreements and floor plan payable agreements that were renewed or entered into during the preceding 12 months. Line of credit monthly statements will show the principle amount due and the current interest rate. Ensure that the account balance ties to the year-end statement, and provide your accountant with a copy of the statement.

Along with lines of credit, your accountant will need copies of any new long-term debt agreements entered into by the dealership. It is a good idea to contact the bank and request verification of the principle balances due at year-end. Your accountant will also need to know the current interest rate being paid on variable rate loans.

The final account often overlooked is retained earnings. The account detail should be reviewed for posting errors that were possibly made to the account throughout the year. The only entries that should have been made to the account are the entries given to you by your accountant for the prior year.

Setting aside time to adjust items discussed above will save numerous phone calls from your accountant. By reviewing these items prior to your accountant’s visit to the dealership, the year-end process will be much quicker and smoother.