by Car dealerships require accounting services from CPA firms with experience in the industry. These services include dealer factory financial statements, inventory management, centralized accounting, and tax preparation.
Dealerships use unique accounting and tax methods and have specialized computer systems. They need accounting professionals to provide strategic insights into government compliance and cybersecurity.
Inventory Management
Car dealerships often operate unique businesses under one roof, including new and used vehicle sales, service, parts, body shop, finance, and insurance. Managing these functions efficiently requires special car dealership accounting methods and tools, including specialized software. A CPA firm that understands automotive dealers and their specialized accounting methods can help them improve operational efficiency and profitability.
In addition to general bookkeeping and financial statement preparation, a good CPA can offer a wide variety of specialty services unique to the dealership industry. This includes inventory management. A sound inventory system is vital to the profitability of a dealership. The company must seldom have more stock than it sells in a given period.
Accounting entries that are reliable and consistent are the best approach to managing inventories. For example, it is helpful to separate sales, cost of sales, and reconditioning accounts by type of sale, such as retail vs. subprime, which helps analyze strengths and weaknesses in each area.
Some dealerships use the LIFO method of valuing inventory, which allows them to defer income tax at lower rates. This method involves significant data collection and clerical work but can provide substantial benefits to multi-entity dealerships. A good accountant can review and verify LIFO assumptions and help a dealership exploit its advantages.
Financial Statement Preparation
Car dealerships often require specialized accounting and tax methods, unique computer systems, and complex financial statements. A CPA firm specializing in automotive accounting can provide invaluable insight and assistance to a dealer, avoiding costly mistakes and ensuring accurate information.
Whether it’s a cash flow statement or business financial report, these documents are the end-product of your accounting system and serve many purposes, including providing you with a roadmap to success, assisting in applying for loans or facilitating a sale or purchase of the company. Preparing these reports requires moving individual account balances from your adjusted trial balance into a formatted statement and can vary in complexity depending on the document’s purpose. Some reports require footnote disclosures, while others reflect numbers from your trial balance.
Professional accountants adhere to Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS) while creating these essential papers. By following GAAP guidelines, accountants can ensure that their statements are reliable and comparable. Additionally, they collaborate with the customer to ensure they comprehend the information provided and why. Having a trusted advisor who knows your business can help you avoid costly mistakes, find tax savings opportunities, and meet your financial goals.
Financial Reporting
The financial information of car dealership accounting departments should be accurate and reliable. This is important to dealership owners, management, employees, manufacturers, and lenders. In addition, obtaining and analyzing CPA-prepared financial statements can help a dealership identify opportunities to improve operations and reduce costs.
Automobile dealerships operate multiple mini-businesses under a single roof, such as new and used car sales, parts, service, body shop, finance, and insurance (F&I). Therefore, the management of these departments needs to monitor their performance as well as the overall financial health of the dealership. Accountants for car dealerships can help by establishing a financial reporting system that makes it easy to track results.
Additionally, auto dealers manage cash flow by analyzing inventory turnover and monitoring the balance sheet for inflows and outflows of funds. An accounting firm can also help set up a system to ensure the dealer has sufficient cash to meet its debt obligations and other financial requirements.
A team of dedicated, experienced professionals can handle all automotive dealership accounting needs. They may assist with various problems, including office consolidation, payroll and tax preparation, internal controls, month-end operations, fraud investigations, and regulations and industry standards revisions.
Tax Preparation
CPAs must have a full understanding of the automotive dealership industry. Dealerships produce complicated financial statements, use unique accounting and tax methods, and have specialized computer systems. A CPA firm with industry experience can help dealers understand these complex concepts and provide valuable advice.
Moreover, the IRS and state tax agencies keep a close eye on car dealerships due to the high volume of cash flowing through these businesses. If dealerships break federal and state tax regulations, they can face tax audits or criminal investigations. CPAs can assist clients in preparing for IRS audits or tax investigations, and they often have relationships with IRS auditors and tax lawyers that they can call upon for support and representation.
Aside from assisting with accounting and tax preparation, CPA firms offer various other services to individuals and businesses, including business planning, investment advisory, tax consulting, and estate planning. They can advise clients on the best ways to save money, invest, and deal with unpaid taxes and tax debts. They can also help people create budgets and advise businesses on investments, financial planning, and acquisitions. CPAs can also perform monthly accounting to help businesses manage costs and spot areas where they can save money or reduce expenses.
