Most dealerships have team members who are responsible for accounting and finance. These individuals might be trained in the position or hired for their expertise. Because managing a dealership is complex, it’s easy for dealership owners and managers to entrust these individuals with their tasks without strict internal controls, regular check-ins or process and technology assessments. Today’s auto dealers also manage disruption driven by the COVID-19 pandemic and resulting digital acceleration. They’re forced to consider how they might change their business models, which adds a significant load to their long list of responsibilities. As you can imagine, this leaves a lot of room for error, inefficiency and even fraud. One of the best defenses against these risks is good cash management, which includes monthly bank reconciliation to confirm your cash is accurate. Conducting a dealership diagnostic check, along with consistent reconciliation, can help maximize efficiencies and profitability. Why Good Cash Management Is Critical for Dealerships Careful cash management and monthly reconciliation are essential for dealerships to stay viable and pursue businessbuilding initiatives. Understanding your actual cash flow and current cash status helps you identify and avoid risks, find opportunities to nurture and improve your cash flow, and make well-informed financial decisions. Consider, for instance, that a teammember might be entering numbers incorrectly without realizing it, giving the appearance that you have more cash than you do. Or that there is regular, barely detectable theft occurring internally, adding up over time. Timely monthly reconciliations can expose discrepancies like these so you can address them. What Reconciliation Means for Dealerships For dealerships, reconciliation primarily refers to bank reconciliation. This is a regular business activity where staff cross-checks the general ledger activity with the actual bank account activity to make sure all transactions are properly posted. This is how you will reconcile your cash to your account activity. Other reconciliation activities include vehicle inventory and floor plan reconciliation. Bank reconciliation is central to cash flow management because this regular view of your actual financial activity and cash status empowers you to identify: • Where you might improve the inflow and outflow of cash • Opportunities to improve processes • Unnecessary spending and loss • Unusual activity and errors If your bank accounts and cash don’t reconcile, it could be something as simple as a miscalculation or something as substantial as fraud. Even a simple miscalculation is worth continued on page 26 25
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