5 Financial And Accounting Processes That Might Be Due For A Revamp

5 financial and accounting processes that might be due for a revamp

If you ask some dealership owners why they do things a certain way, they might answer, “Because we’ve always done it that way.” But with all the changes that have taken place in the financial and accounting realm, doing things the way you’ve always done them could be costing your dealership in terms of lost efficiency and profits.

Revisit your processes

Now might be a good time to rethink and revamp your financial and accounting processes, if you haven’t done so already. Some of them may have been in place for a long time and outlived their usefulness. Here are five ideas to consider.

1. Use an automated payables (AP) system.

If your dealership is using traditional paper-based processes to manage accounts payable, you could be wasting both time and money. AP automation technology solutions exist that can help you streamline the payables process by eliminating paper. The result is greater efficiency, lower cost, more security and the ability to capture early payment discounts that may be available.

With most AP systems, invoices are scanned in and posted automatically to the system based on the purchase or invoice number. The person responsible for reviewing the invoice (for example, the parts manager or general manager) makes sure everything matches and approves it for payment if it does. The invoice is then paid electronically based on the payment terms negotiated with the vendor. See “Go paperless (or close to it)” at X for other paperless ideas.

2. Accelerate bank reconciliations.

Many dealerships don’t reconcile their bank accounts until the end of the month, but there’s no reason to wait this long. There are many potential benefits to daily reconciliation, such as catching contracts in transit that have been cashed but not recorded.

Daily reconciliation also can help speed up monthly closings (see more below) by eliminating the reconciliation “crush” at month end. Consider purchasing software that can read bank records daily, automatically match outstanding checks that have cleared and update the payables check file.

3. Streamline monthly closings.

Most dealerships are required to send their monthly financial statements to the factory no later than the 10th day of the following month. But they often don’t start the month-end close process until a few days before the end of the month as they wait for month-end numbers.

However, you don’t have to wait for standard monthly entries that remain the same, such as depreciation, prepaid expenses and property tax or insurance accruals. Integrated software can also shorten the monthly closing lag by feeding subsystems (such as accounts payable) into the general ledger. Starting your month-end closing process sooner puts less pressure on your accounting staff and improves the accuracy of your financial statements.

4. Use corporate purchase cards.

Issue a purchase card (or p-card) to at least one employee in each department to cover small items — say, those under $100 — and travel and entertainment expenses. This will enable accounting to make a single payment for multiple small items, instead of processing a lot of small-dollar checks.

As an added benefit, most p-cards offer points and cash-back rewards that can add up over the year. These can be put toward dealership expenses, such as advertising, or simply used to boost the bottom line.

5. Use a standard chart of accounts.

Each area of your dealership — new and used sales, parts and service, and finance and insurance (F&I) — should use the same list of accounts that makes up the store’s general ledger. Standard guidelines also should be used for coding all transactions. Making all accounts and account numbers standard across the dealership will help increase reporting accuracy and eliminate redundancy and confusion.

Ready to update?

Just because you’ve always done things a certain way doesn’t mean that’s the best way to do them. Talk to your department heads and accounting staff about which processes at your dealership might be due for an overhaul.

Go paperless (or close to it)

Many dealerships have largely converted their paper processes to digital to help lower expenses, increase efficiency, meet compliance regulations and be more eco-friendly. What’s more, today’s tech-savvy customers increasingly expect dealerships to move from paper to the digital realm.

Using an electronic document management system could save up to 50% of physical and digital storage space and up to 40% on document handling. It could also reduce the time needed to create and modify documents by up to 90%, according to Gartner, a research and advisory firm.

While it might not be possible to completely eliminate paper in a dealership, plenty of documents can be digitized. These include parts invoices and repair orders, finance and insurance paperwork, invoices and payables, payroll documents, and deal jackets.

Several off-the-shelf document management solutions are available to help you convert from paper to digital. Examples include CDK, DocuPro, One View, Rubex by eFileCabinet and Scan123. RWC can help determine which solution is right for your dealership.

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