Profit-killing car dealership practices
Car dealerships cannot exist unless they are profitable and car dealership owners, have learned revenue doesn’t necessarily guarantee profitability.
Due to the COVID pandemic and supply chain issues that have had a negative effect on the inventories of car dealerships, prices were at an all time high. Now the prices of new cars as well as used cars have finally begun to drop in price and many dealers across the U.S. have been experiencing a period of significant profits.
Although the staff working in your financial department don’t generate income in proportion to your sales and service staff, what happens in that office can have a significant impact on the profitability of your dealership. If your financial department isn’t managed efficiently there could be a negative impact on profits – in other words, you’re losing money.
It’s time to upgrade your technology
Some more common car dealership accounting practices that could be eating into your profits include:
- Manual input and reporting of data
- Inadequate training of employees
- Unfamiliarity with accounting functions on the part of senior management
- Insufficient routine review of reconciliations leading to undetected errors/fraud
- Overworked underappreciated staff, affecting the efficiency of the department
A top priority for the financial department of any car dealership is to mandate a switch to an all-digital process for data entry. This can be a challenging process, so make sure your staff have all the necessary resources to make the transition a successful one.
Investing in your people
If you know where potential problems are likely to occur in your dealership’s accounting department, it’s time to be proactive vs. reactive. Car dealership employee training is essential to running an efficient financial department. Without the necessary training and oversight by senior management, employees can cause some significant problems.
Your senior management team needs to be familiar with accounting functions and how to manage that side of the business. Without it your dealership could be vulnerable to employee theft and fraud.
If you’re concerned that these and other profit-killing practices are hurting your business, consider partnering with an accounting firm for car dealerships to help you successfully navigate the constantly evolving automotive industry.
At GYL CPAs and Advisors, we provide a wide range of expert accounting services. Our niche services include, amongst others: audit and accounting services, internal control reviews, reconciliation services and more.