As the year approaches its end, many dealerships are confronted with a critical juncture – the need to wrap up the current year while simultaneously laying the groundwork for the year ahead. Unfortunately, the term “Year-End” often steers dealers in the wrong direction, focusing their attention primarily on concluding the year. This tendency hinders them from allocating the necessary time for thorough strategic planning for the upcoming year, which is crucial for continued success. This article explores items that either hinder a business, placing it on the “naughty list,” or propel it forward, securing a spot on the “nice list.”
As we start exploring, keep in mind that there are different levels to each of these operational activities. While some of these items are easy during one phase of the business, rapid growth, lack of capacity, and lack of training or staff can easily make these items seem too far out of reach. If the items below are new to you, we would suggest not taking them all on at once. It is likely that some of these items may not be achievable for 2023 by the time you read this article. Most of these tasks should be performed at least once a year. As you grow, gain more capacity, and/or find your groove, it becomes easier to complete them with higher frequency, such as quarterly, monthly, weekly, etc.
Let’s start with the naughty list.
Year-End Naughty List:
Incomplete or Bad Data: while it is possible to survive based on “gut feel” it can be difficult, stressful, and maybe more importantly, difficult to scale when your team doesn’t have your same level of education in the “School of Hard Knocks.” This is where a powerful DMS system and accounting system really prove its value to dealers. There would be too many things to efficiently keep track of on paper, excel spreadsheets, etc. and do it on a regular and timely basis.
- Unreconciled bank and credit card accounts: reconciliations should happen at least monthly and no later than 30 days from the statement date. We do not trust any financial statements if reconciliations have not been completed inside the dealers accounting system. As your processes improve, your data can improve by shorting your month-end close from 30 days to 15, 10, and then 5 days after the statement date.
- Limited to no controls around aging reports: Dealerships have many aging reports including accounts receivable, accounts payable, inventory, special orders, repair orders, and sales deals. Each should have a company policy in regard to reviewing and clearing old items out of their individual detail reports. In most cases, except for major unit inventory and flooring, items should not remain on these reports for more than 60-90 days. Without such policies, dealers risk overlooking bottlenecks in processes, compromising cash flow, and wasting payroll dollars on repetitive research.
- Employees are not “bought in”: This can be related to pay plans, using technology to log daily activities, misunderstanding of company vision and values, etc. To address this, consider conducting employee surveys, have an “Anonymous Comments to Leadership” box, organize training sessions, or send staff to educational conferences. These initiatives can help you learn more about your employees and help your employees recognize the significance of their roles and understand the extent of their influence within the company.
Year-End Nice List:
- Departmentalizing expenses: If distribution methods are based on Revenue or Margin they are being updated regularly (at least annually). Each department is fairly allocated for what they utilize, and a review of their departmental bottom line is happening regularly.
- Established cycle counting: Ideally all parts would be counted various times throughout the year and a full physical inventory would take place before year-end if cycle counts aren’t handling 100% of your inventory during the year.
- Tax planning throughout the year: Your tax bill should not be a surprise. Quarterly payments are being made and tax strategy meetings are happening at least 2-3 times throughout the year with your tax accountant.
- Year-End is very similar to Month-End: From a historical perspective month-end and year-end should be almost identical, with a few exceptions. Timing is key here. We see many dealers struggle to finalize their previous year-end right before tax deadlines. Tax deadlines typically fall on crucial timeframes for ramping up busy season or making sure you are getting the most out of the end of the season.
- 1,2, 5-year plan in place: It is easy to pick up new responsibilities throughout the year as your business grows. Dealers that are mindful of how many hats each individual wears typically get more done and are more successful. Sometimes we see dealers assigning 10-gallon hats to individuals that are not quite ready for it. Their intentions are sound, hoping for them to grow into their roles but without proper planning they get swallowed up. Setting aside time to make sure you are on track with your 1,2 and 5-year plan allows you to stay focused and build momentum.
As the year draws to a close, dealerships should focus not just on what has been, but on what can be. By combining sound accounting practices with strategic management, dealerships can ensure a smooth transition into the new year, setting the stage for success. Reflect, plan, and embrace the opportunities that the year-end brings for a dealership that remains firmly on the “Nice List” year after year.
Here at The Accounting Guys, we focus on helping dealers move forward. Often you will hear us say, “Accounting should not be holding your business back; it should be propelling it forward.” With that, hopefully, this year-end feels more like a gift in the form of an opportunity to drive your dealership forward as opposed to a lump of coal to be endured as you close out the year.
Want to learn more? Feel free to connect with us. https://theaccountingguys.com/contact-the-accounting-guys/