Automotive Updates

Automotive Consultants, Automotive Dealership Consulting Firm, Enterprise Management Services, Mergers & Acquistions, Litigation Support

By Courtney Becton

Over the years, the Axiom Advisors team has had the opportunity to work in many areas serving the retail automotive industry, including working directly in dealerships and for CPA Firms. In these years, a common trait observed about dealership owners and executives, is their plates are always full. Work-life balance seems nearly impossible and getting burned out is more likely, which in turn, increases the margin for error and key operational details can be overlooked. The financial aspects of typical dealerships are unique, highly intricate and can be stressful to maintain. Often-times, owners are wearing multiple hats and haven’t been able to relinquish control over responsibilities to the appropriate personnel. Often, there isn’t sufficient headcount, or the right skill set to effectively delegate all the work that needs to be done.

Having worked in dealerships for many years, I grew to believe that outside help was very limited or even non-existent. After [...]

By Phil Villegas

Last year GM was the first of the major manufacturers to cease reporting sales on a monthly basis and shift to quarterly reporting. Ford followed suit early this year and FCA announced earlier this month to do the same.  Prior to GM making the initial move, the only other mainstream manufacturer to not report monthly but rather quarterly was Tesla. The move essentially allows the manufacturer some latitude in having to explain monthly spikes and/or drops that can be seasonal or tied in with fleet sales, allowing them to gain better control of the message when reporting quarterly.

I agree with the move of getting away from monthly reporting and opting for quarterly, I can only wish this move could trickle its way to dealers moving to quarterly financial reporting.  I believe that similar to manufacturers, for dealers, monthly sales reporting is somewhat of an inefficient and non-representative financial picture of the [...]

By Marilou C. Vroman, CPA, CFE

A dealer and his loyal CPA and family attorney typically form a bond over the years in a relationship that has potential to last for decades provided that level service and value for the price paid both remain high.  I believe that this relationship is important and should be respected by other CPA, consulting and advisory firms.  However, a dealer may have specific needs that require the skills of a specialist.  Is it OK to explore and engage the use of more than one firm to address a dealer’s highly specialized operational needs?

Accountants and attorneys, like doctors, often specialize in a practice area.  While every doctor knows that exercise and proper nutrition will lead to a healthier body and every CPA knows how to properly keep the financial records, and most attorneys know contract law, not every doctor knows how to perform heart surgery, nor does every accountant [...]

By Phil Villegas

Several years ago, there was a great cartoon I came across from Leo Cullum.  At the time it truly resonated with me since I was working with a CPA firm and could clearly see firsthand the differences between “accounting” and “accountability”.

While most CPAs, will go to great lengths to tell their clients a reviewed or audited financial statement is not designed to uncover fraud, most dealers will simply hear the word “audit” and will get a false sense of security that all of their transactions are being analyzed.

For a CPA to provide an opinion on a financial statement, they need to ensure that it’s not materially misstated.  The term “materiality” is a cornerstone of most engagements.  Materiality is the maximum amount by which auditors believe a statement could be misstated, by known [...]

By Marilou C. Vroman, CPA, CFE

On April 15th there tends to be some nervous energy around.  It is Tax Day.

Whether you choose to file your tax return by April 15th or file for an extension, your personal tax obligation is still due on this day.  Ever since my first real job and learning the rules of federal withholding, I was the one who thought that it was better to withhold a little extra along the way, than to get hit with a large tax bill and have to write a painful check.  However, not all employees are so conservative and some, may go to any length to beat the system.

Dealership’s have a wide array of personnel with varying tax situations.  From individuals claiming complete exemption from federal income tax withholding, to those who claim zero allowances and, well, let’s just go ahead and request some additional withholding while we are at it.  [...]

  • 04/10/2019
  • Updates
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  • Comments Off on Phil Villegas, quoted in the “Auto Dealers Get Raw Deal From Thieving Employees” article by Steven Finlay

Phil Villegas has been quoted on Steven Finlay, WardsAuto article, Auto Dealers Get Raw Deal From Thieving Employees.

Read the entire article by Steven Finlay here – https://www.wardsauto.com/dealers/auto-dealers-get-raw-deal-thieving-employees

By Phil Villegas

Our firm is in the business of internal controls, which in essence is the safeguarding our dealer’s assets.  When we evaluate the internal controls of dealerships, we are primarily looking for weakness in the system that can lead to the dealership losing some of its assets, i.e., cash/profitability.

Internal controls at a dealership are not difficult, a little bit of common sense along with utilization of the DMS’ resources go a long way in safeguarding the dealership’s assets.  Dealership internal controls are less about having a written and detailed list of operating procedures and more about having good oversight.  When we encounter breakdowns in a store’s internal controls during our testing, it’s typically not because there wasn’t a system or process in place, but rather we find the breakdown is a human one.  Individuals failing to do their job is not only the most common reason why internal controls break down, it [...]

By Marilou C. Vroman, CPA, CFE

A recent article surfaced regarding a dealership embezzlement where a service department employee was allegedly taking cash collected from service customers for their service work and subsequently pocketing the funds.  The scheme was perpetrated by manipulating the repair orders after the customer had paid for the work.  The repair order would initially be customer pay, and once the funds were collected, the repair order would be changed to a warranty repair. At times, the VIN and actual repairs performed would be altered to create what appears to be a valid warranty claim in an attempt to recover the stolen funds from the manufacturer.   We often see repair orders voided or labor hours discounted in order to cover up the theft of cash.   In this case however, the employee likely realized the technicians still need to be paid for the hours flagged as per the original repair order and would [...]

By Phil Villegas

As internal auditors and forensic accountants, we always approach most operational and accounting reports with a degree of skepticism because we ultimately know the impact that human behavior can potentially have on these reports.  To emphasize how important it is for us to know the reports and data we are looking at are pure and unaltered, it is standard protocol for us to require our clients to provide us system access in most of our engagements.  We will seldom, if ever, rely solely on client reports if the reports have not been run by one of our associates.  While this can often create increased workload for our team, it’s fundamental to what we do.

The recent story below, which is true will highlight the importance of this.

One of our analysts, who was not as well versed with the UCS as he is with other DMS systems, had requested a copy of [...]

By Marilou Vroman, CPA, CFE

Buying a dealership can be an exciting and stressful proposition.  Working with manufacturers, lenders, attorneys and accountants all in the interest of getting past the closing table to run your new automotive retail venture.  Many of the hurdles of acquiring a dealership can be overcome, but one area that can create a significant amount of stress between buyer and seller is negotiation and interpretation of the asset purchase agreement (“APA”) which governs the sale of the dealership assets.

For those contemplating their first acquisition, the APA will typically highlight what will be purchased (e.g. inventories, fixed assets, goodwill etc.) and the method of valuation of each type of asset.  The interpretation of the “what is being sold and for how much” can put a dealership transaction at risk if left until the date of closing to be discussed between buyer and seller.  For example, an APA will typically include new [...]

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