There are three key advantages for buy here pay here (BHPH) auto dealers to establish a strong partnership with their CPA firm: maintaining compliance on bank financing, filing an accurate and clean tax return and operating at a profit. When these three advantages are realized, the dealership is set up properly to sustain cash flow and avoid costly penalties by state or federal agencies like the IRS. In this article, we explore common accounting mistakes made in BHPH dealership structure in the areas of discounting, reporting, remitting sales tax and customer service — and how to add more structure to efficiently scale up your operation.

Used cars are in high demand — and not just by people with no credit or bad credit. Debt-averse consumers of all stripes are shopping a wide variety of used inventory online or with their favorite dealer.

Sub-prime lenders also view used cars as a hot commodity again, and have become competition for buy here pay here dealers and their Related Finance Corporations (RFCs). As the industry saying goes, “NOW is the best time…” for BHPH dealers to make sure their systems and records are efficient and clean to compete in this competitive landscape.

There are three distinct advantages to operating a clean and efficient BHPH dealership. Dealers can more easily document and satisfy bank financing terms during an audit. They can plan ahead and file an accurate tax return and remit accurate sales tax. They can also attract and keep more customers in vehicles for a longer period of time.

In our experience, problems with accounting or collections or sales tax remittance often don’t come to light until an audit or tax return preparation. That timing may lead to a costlier process to fix problems, including potential penalties by the IRS, state department of revenue or even the Consumer Finance Protection Board (CFPB).

For a few hours a month — and the right knowledge about which data to record and which reports to review — your dealership can be efficient, competitive and scalable. The following blogs contain key ways to add structure to your BHPH dealership, based on popular topics discussed at the 2016 NIADA National Convention in Las Vegas.

• Leverage Your Dealer Management Software 
• Dealer Collections Best Practices
• Budget and Expense Oversight
• Startup dealer? Do it right the first time

If you are looking for a strong CPA partner to assess your software, budget, KPIs or processes, talk to the business services group at Cornwell Jackson. We work with dealers on a monthly basis to keep their accounting and reporting organized for proper compliance, better cash flow and enhanced profitability. Plus, we understand the regulatory issues and competition that impact the bottom line of this industry.

Scott Bates, CPA, is a partner in the audit practice and leads Cornwell Jackson’s Business Services Department, which includes a dedicated team for outsourced accounting, bookkeeping and payroll services. He provides consulting to clients in healthcare, real estate, auto, transportation, technology, service, retail and manufacturing and distribution. Contact Scott at scott.bates@cornwelljackson.com or 972-202-8000.