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Top 10 Cash Concerns for Auto Dealerships

The following article outlines 10 cash concerns most often seen in auto dealership accounting and how dealers can address them. Read on for details. 
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Emerging from the height of the COVID-19 pandemic, many auto dealers saw record-setting profits thanks to high demand and favorable per-vehicle margins. But despite this historic success, one question may still be on dealers’ minds: “Where’s my cash?” The following article outlines 10 cash concerns most often seen in auto dealership accounting and how dealers can address them by taking a sharper look at their expenses, receivables, and reconciliations.


It’s human nature: In good times, it’s tempting to trade diligent expense monitoring for a more relaxed approach, but if you aren’t restraining your expenses, the following factors may be chipping away at your capital:

  1. Advertising
    • In the thick of the pandemic, advertising took a back seat as dealerships experienced high demand for a more limited inventory pool. As market trends shift, be sure to survey your advertising expenses. This is an area where costs can add up quickly!
    • If you haven’t looked at this line item recently, now is a good time to review your advertising spend to confirm you’re seeing the desired return on your investment in the form of lead and profit generation.
  2. Outside Services
    • Ask your general managers to review their outside services for redundant or unnecessary expenses.
    • For example, if you find five general managers using five different platforms to assist with customer relationship management (CRM) or pricing inventory, you now have an opportunity to streamline vendors and potentially negotiate better terms.
    • In addition, if you can cancel outside services that no longer benefit your team, that’s another cash management win.
  3. Floor Plan Interest
    • Keep your inventory in check. In times of higher interest rates, it’s essential to carefully manage your inventory and corresponding interest expenses, so you’re not overspending on excessive inventory in your store.
  4. Equipment Leasing
    • Similarly, higher interest rates should prompt heightened attention to your equipment leasing process.
    • Research different vendors and debt structures to minimize extra expenses before making a leasing decision.
    • Review the proposed equipment interest payments and consider whether it’s more cost-efficient to lease or buy the equipment at the outset.
  5. Used Vehicle Pricing
    • Scrutinize your used car buying process so that the sales are priced and timed appropriately. Dealerships make money on used vehicle trade-ins by deftly managing both the purchasing and reselling processes. Confirm that employees handling trade-ins have enough training and experience to set prices so that used vehicle inventory consistently sells for a profit.
    • Similarly, knowing when to let go of underwater inventory is an art, so delegate this responsibility to employees who have mastered the craft.


Are your procedures for collecting receivables well organized and timely? Slowdowns in the following areas may be hindering your overall cash flow:

  1. Contracts in Transit
    • Fine-tune your contracts in transit (CIT) processes so all CITs are paid in fewer than 30 days and, ideally, fewer than 15 days.
  2. Incentive Payments
    • Confirm that your finance and insurance (F&I) producers have solid systems in place for manufacturer incentive programs.
    • If necessary, shore up your documentation process to demonstrate that the incentive extended was appropriate and maximize profit margins on this type of sale.
  3. Deal Flow
    • Documentation due diligence is also required for your underwriting process.
    • Verify that deal file checklists are up-to-date and completed promptly by your F&I producers to help your store receive payments more quickly and avoid bottlenecks in deal flow.


Consistent reconciliations are a simple yet overlooked practice in cash management. When providing accounting assistance for dealerships, we encourage reconciliation discipline to help avoid the following pitfalls:

  1. Insufficient Daily Reconciliations
    • Hopefully, your team is already performing a cash reconciliation each business day. This daily habit should go beyond simply comparing your bank statement with your books. Rather, your team should have insight into all outstanding checks and deposits in transit as part of this process.
  2. Failure to Conduct Monthly Reconciliations
    • Daily reconciliations alone won’t keep you on top of your cash flow. Your team should complement daily reviews with more extensive monthly reconciliations. We recommend performing the following each month:
      • A formal bank reconciliation.
      • A formal floor plan reconciliation.
      • An analysis of schedules for accounts receivable, accounts payable, and accruals for aging and possible mispostings.
    • These reconciliations will allow your dealership to catch cash-management errors and amend internal processes before minor lapses compound into bigger headaches.

Now that you’re addressing 10 common ways you may be parting with too much cash, the next logical question is: “How much cash should I keep in my store?” This amount will be unique to each dealership. Experienced dealership consultants see the benefits of maintaining enough cash to help your store run smoothly but not so much that you create a disincentive to monitor your expenses, receivables, and reconciliations.

How Forvis Mazars Can Help

As industry analysts continue to predict potential headwinds for profitability, it is increasingly important to focus on cash flow and encourage solid cash management habits across your team. The knowledgeable professionals in our Dealerships Practice can help answer your questions as you refine your business’s cash management systems. Reach out to a professional at Forvis Mazars or submit the Contact Us form below.


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