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Measuring and Then Managing the Dealership's Cash Flows

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In addition to keeping track of how the dealership records and reports financial transactions high on the list of Automotive Controller responsibilities is to make sure that the dealership has the cash to operate effectively and at the highest possible performance. Accounting for Assets and Liabilities is necessary, but as you well know, not all Assets are CASH.

Before you print the financial statement, reconcile all balance sheet accounts as if someone will audit the statement.

On the financial statement, there may be more than one account lumped into a single line on the statement, for example:

The Cash in Bank line on the financial statement may consist of several accounts:

  • Cash in Bank, Checking Account, Operating Account

  • Payroll Account

  • Sales Tax Collected and Payable (applicable in some states)

  • Money Market (if no separate line is available)

Service Receivables should have individual account numbers for each type of receivable to make it easy for Department Managers to track their areas of responsibility:

  • Extended Service Contracts

  • Parts Wholesale Receivables

  • Body Shop Insurance Receivables

If you have more than one franchise on the financial statement, each franchise should have separate accounts for vehicle inventory, parts inventory, and factory receivables accounts.

Most Assets and Liability Accounts should have a detailed backup in the form of Schedules to confirm the balance sheet value. Below are accounts that typically aren’t on a schedule, so you either reconcile with the physical asset or you confirm the accounts are accurate every month.

Asset Accounts typically not on a Schedule:

  • Cash Clearing— needs to be zero every day

  • Petty Cash—count the cash at the end of the month to confirm it is all accounted for

  • Money Market—confirm finance source shows the same balance as the General Ledger

  • Parts, Tires, Gas, Oil, Paint and Materials, any account not on a schedule. Each has it’s own account number and is confirmed through physical inventories or reconciliation.

Liability Accounts typically not on a Schedule:

  • Sales Tax—Paid as your state mandates

  • Payroll Accruals—This should reflect money due to Employees for the days between the last payroll and the last day of the month.

Cash in Bank

Reconcile your bank accounts daily. Your DMS should make it easy to reconcile the General Ledger with your banks’ balances. When this is standard practice, you catch problems and you don’t have to reconcile the accounts at the end of the month.

Cash Clearing Account

The cash clearing account is simple, yet it can quickly get out of hand. There are several ways to utilize this account, but the result is a zero balance daily. If one day goes by when the cash clearing account is out of balance, you’ve created more work for yourself.

The cash clearing account is a step between collecting the money and making a bank deposit. The number of cash clearing accounts depends on the number of deposits you make. If the Body Shop makes deposits—it should have its own clearing account. If the Sales receipts are batched into one deposit, those should have a separate clearing account. The purpose of multiple clearing accounts is so you know where to look if an account isn’t zero after the bank deposit is posted.

The cash and checks should be put into a locking bank bag at the end of the day, along with the credit card transmission recap, then into a safe. The person making the deposit shouldn’t be the one collecting the monies. If you make more than one deposit, such as one for Service & Parts and one for Sales and Accounts Receivables, you need two locking bank bags.

The Cashier can use a “form” to recap the amount of cash, the value of the checks, and credit cards collected and submitted for deposit. This form doesn’t have to be paper; email a recap detailing what is in the bank bag to whoever makes the deposit.

The accounting for the cash clearing account is as follows:

  • Post or close the Receipts (for Accounts Receivables/Car Deals) to a cash clearing account.

  • Post or close Repair Orders to the cash clearing account. (see Figure 2.2 below)

  • When you make the bank deposit from the monies brought in, the deposit entry posts to the bank account and the offset is to the appropriate cash clearing account.

  • If the account(s) show zero, your account is accurate. If it is not zero, locate the problem immediately and fix it.

The above is just a small excerpt for a more detailed DealersEdge Guide – Accounting Guide for Dealership Controllers and General Managers. In fact it is just a small part of the Chapter devoted to Managing the Dealership's Balance Sheet. When it comes to the Balance Sheet, there is much more to explore.

See below for info on how to get a copy for your desk.


A Comprehensive Automotive Accounting Guide Puts Facts, Processes and Tools Right At

Your Fingertips!

This is your “Go To” Desk Reference for all questions related to dealership accounting functions, reporting and guide and to improved results!

When questions surface you will have a ready reference to gather details and craft a plan of attack...

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