4 reasons that car dealers go bankrupt
While your sales staff may be doing a great job of selling cars and generating revenue for the business, if your office isn’t being efficiently managed, that means that your money isn’t either. Just because your business is generating income doesn’t necessarily guarantee that it will be profitable.
The accounting department plays a vital role in the overall success of a car dealership. Your accounting office is responsible for keeping track of all the money coming in and going out. What happens in your accounting office can cut into your profits margins.
In order to have a profitable dealership, you need to make continuous improvements in all departments, including accounting. What were once best practices could be costing your business much-needed revenue. Some profit-draining car dealership accounting practices include:
- Wasting time with data entry: Many accounting departments are still using “old school” accounting practices — manually entering data in stock books or long books. Switching to an all-digital system can make a huge difference in decreasing the risk of human error when keeping track of important data, such as identifying return customers, aging rebates, and parts inventories.
- Poorly trained dealership employees: People are often hired to work in the accounting departments, but don’t have adequate training in accounting or a background in accounting. Senior management needs to make this requirement a priority when hiring as well as training current staff on new digital accounting systems.
- Management not understanding accounting needs: Your senior management team needs to have some familiarity with accounting functions and management because many of them will have come up through the sales department. Provide them with the proper training.
- Not prioritizing reconciliations: It’s crucial to the success of your dealership that you are reviewing reconciliations on a monthly basis, including bank, inventory, and vendor reconciliations. If you’re not doing this, errors and/or fraud can go undetected, which results in poor management decisions based on erroneous data.
These problems are bigger than they sound
Car dealership accounting problems, especially a lack of attention to monthly reconciliations, can have a domino effect. A simple accounting error can create inventory issues, which can lead to poor management decisions, the results of which can be very costly
Understanding the car dealership accounting process and how it works can be the difference between having a successful dealership or becoming one of the many car dealerships filing for bankruptcy.
We know where the money is
At GYL, we provide a wide range of automotive dealership accounting services from audit and accounting services to bank reconciliation service to inventory controls. We can provide on-site training for your accounting department personnel in the areas of accounting software, internal and reporting controls, and more.
Our accounting services will provide your business with the necessary tools to make better decisions when it comes to turning a profit vs. avoiding bankruptcy. However, if your dealership is facing bankruptcy, we can analyze your situation and provide advice about which chapter, Chapter 7 or Chapter 13, is the right option for your situation.
Call for a free consultation to learn more about how we can serve your business.