Category: The Weekly Spiff!

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By Marilou Vroman

How well is your parts department performing?  Are revenues up from last year? Are margins over 40%? These are some of the more common indicators of a healthy parts department and the best parts managers will certainly be watching these numbers closely.

However, there are many other performance indicators that are equally as important and should be reviewed by both the parts manager and the general manager.  Below is one of our favorites:

Level of Service/Fill rate – These terms refer to how well the parts department inventory in stock has met the demands of its customers.  It’s great to keep inventory levels low and maintain proper days’ supply, but are you stocking the parts that your customers actually need?

Here is how to find out:  Take total parts sales for the period and divide number into total sales plus the total dollar value [...]

By Mercedes Hendricks

Thousands of transactions run through a dealership in any given month, sometimes any given week or day.  Most of these transactions, such as vehicle sales, are typically initiated in operational databases such as F&I and are not recorded in the general ledger until the deal jacket is brought up to the accounting office to be finalized.

In looking at the F&I History, you can easily see when deals were initiated and when they were finalized.  F&I History will also indicate whether a deal was financed, paid in cash or some combination thereof.

This data can tell you how long it takes to finalize a deal.  This piece of data can be particularly interesting for cash deals.   Completed cash deals should only take 24 hours from its contract date to be delivered to the accounting office to be posted in the general ledger.  If a cash deal [...]

By Dan Flugrath

The IRS has proposed regulations that eliminate the majority of valuation discounts for minority transfers of interests for controlled family partnerships, S corporations and other family ownership structures to other family members, such as the next generation. The IRS likely will finalize these proposed regulations sometime in 2017.

The proposed regulations take aim at eliminating discounts for lack of marketability and lack of control. The changes deal with lapsing rights and liquidation restrictions. The regulations disregard certain restrictions for transfer tax purposes.

Let’s consider this example: If Dan, Jim and Bill, all brothers, each own equal shares of a partnership or S corporation.  Dan needs to sell, but must obtain the consent of Jim and Bill in order to sell to an outsider.  This restriction would be ignored for valuing the transfer.

In addition, lapsing rights will become taxable transfers. The proposed changes treat [...]

By Vincent Rodriguez

Is your dealership properly handling exports transactions in accordance with state and federal laws?

In our Axiom Analysis, we often discover weaknesses in vehicle export processes and documentation. If an international customer purchases a vehicle with the intent to export, the customer is not exempt from sales tax unless he or she provides proper documentation.

If a customer intends to export a vehicle, the dealership has the responsibility to prevent the customer from driving the vehicle off the lot by issuing a temporary tag. Direct exports are typically not charged sales tax and are not registered. In turn, typical export rules indicate the vehicle must be paid in full, an affidavit that the vehicle won’t be driven in the selling dealer’s state must be signed, and a bill of lading must be collected for the deal jacket. In addition, we often recommend new vehicles be titled to prevent a MSO from being [...]

By Mercedes Hendricks

For this edition of The Weekly Spiff!  I am taking my CPA hat off.  I am writing this as a customer, as a buyer.

I walked into a car dealership a couple of weeks ago to buy a new car.  I knew exactly what I wanted and I was ready to walk out of that dealership with a new set of keys in my hand.  I had a great test drive experience and the sales associate was very knowledgeable.  I was ready to buy!  Unfortunately, the dealership did not have the exact car I wanted.  The sales associate assured me that he would find the exact vehicle and be in touch.  We exchanged information and I drove off.

That was on a Sunday.  No call or e-mail on Monday.  Tuesday nothing.  Wednesday…did this guy even remember I was alive?  I still have not been contacted (now three weeks [...]

By Dan Flugrath, CPA

Did you know that the IRS has increased the De Minimis Safe Harbor rules pertaining to the capitalization of fixed depreciable assets?  For entities that issue what the IRS calls “Applicable Financial Statements” (“AFS”, i.e. audits) the limit increased to $5,000, and for those entities not issuing AFS (i.e. compilations or reviews) the limit increased to $2,500.  What does this mean for you?  As you purchase depreciable assets, as long as you have a written capitalization policy, you can expense those assets falling below the limit, increasing your taxable deductions.

Let’s consider this example: If 20 desktop computers are purchased at $2,500 each for a total of $50,000, the 20 desktops can be expensed immediately pursuant to the above rule.

If your dealership has an AFS, these additional rules apply:

  1. The accounting policy and procedures MUST be written;
  2. You must consistently follow that policy for both book and [...]

By Marilou Vroman

When was the last time your dealership’s shop charge settings were evaluated?

Many dealerships charge customers for shop supplies on repair orders to recover some of the cost of incidentals, such as brake clean or wheel weights, for example.  For some dealerships, these credits are set high enough to exceed the monthly expense incurred.  If your store is incurring a net expense for service supplies each month, it may be time to evaluate the shop charge settings.

Shop supply charges are typically determined based on a predefined percentage of repair order labor sales and often have a minimum and/or maximum charge.   Dealers may be missing an easy income opportunity when the DMS settings for shop supplies have not been updated to correspond with changes in service business and the increasing cost of shop supplies.

The process of adjusting these settings is quite simple.  For example, in [...]

By Mercedes Hendricks

What are you doing to prevent fraud in your dealership?

According to the 2016 Global Fraud Study by the Association of Certified Fraud Examiners, companies that implemented effective fraud prevention controls experienced 14.3% – 54% fewer losses.  Yet, as a CPA helping auto dealers across the nation, it is always surprising to me how much emphasis is placed on fraud detection controls over preventative controls.  Month end schedule reviews, internal and external audits, account reconciliations, fraud hotlines, and so on are often implemented at dealerships.  While these are all good controls to have in place, finding ways to prevent fraud from happening in the first place will no doubt be the most effective (and least expensive) way to reduce a dealer’s loss exposure.

We all know and understand the fraud triangle; that fraud most often occurs when individuals have external financial pressures, are presented with opportunities to commit [...]

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