Auto Dealership Accounting - The CJ Group | CPAs & Advisors

We have solutions to help your dealership run smoother.

The advisors at Cornwell Jackson understand that auto dealerships face unique challenges each day. One of the most common issues our advisors help dealers to resolve is how to increase cash flow. Many businesses in the auto industry struggle to balance the high cost of maintaining appropriate levels inventory with low influxes of capital.

Cornwell Jackson’s Auto Dealership Accounting Solutions:

Auto Dealership Accounting Specific solutions
Related Finance Companies (RFC)
Tax Planning and Preparation for entities and owners
Audits, Reviews, and Compilations
Business Advising
LIFO Inventory Calculations
Cost Segregation Studies
Develop Estate and Succession Plans
Internal Compliance self-audits on key dealership audit area (sales tax reporting, demonstrator vehicles, warranty contracts, etc.)
IRS Representation

Types of Dealers We Work With:

New and Used Car Dealers
Buy Here, Pay Here
Motorcycle Dealers
RV and Travel Trailer Sales

Software We Recommend:

BHPH Underwriting Software – AutoZoom

Knowledge Base - Auto Dealership Accounting Articles

Customer Service: A Better Approach to BHPH Cash Flow

There are two schools of thought when creating cash flow for a buy here pay here auto dealership. One involves selling cars as quickly as possible and repossessing them just as quickly. The other more viable option is to focus on customer service. By keeping customers in a vehicle longer, the dealer can also secure steady cash flow and support repeat customers as well as referrals. Dealers, collections staff and service technicians are all involved in the customer experience. This article reviews the benefits of a customer-centric approach to cash flow and financial management and the tools that help dealers achieve more profitable payment streams.

Download the Article here: Customer Service: A Better Approach to BHPH Cash Flow

Using Debt to Increase Cash Flow in Auto Dealerships

In the life cycle of any auto dealership, there will be times when cash flow is tight. Buy here pay here dealers in particular face complexity to ensure enough inventory is on hand to attract buyers — and offset that investment with a healthy flow through collections. This balance is never perfect. Dealers need strong banking and/or equity relationships that will extend credit to fill in the cash flow gaps. In this article, we define what a healthy credit relationship looks like and lay out options to effectively use debt for cash flow.

Download the article here: Using Debt to Increase Cash Flow in Auto Dealerships

The Impact of New Credit Loss Standards on the BHPH Industry

Following the global financial crisis of 2007 and 2008, the Federal Accounting Standards Board (FASB) has taken steps to mitigate risk among financial institutions. One of the newest standards is a change from the “incurred loss” accounting model used to evaluate financial portfolios to an “expected loss” model known as the Current Expected Credit Loss model (CECL). For BHPH dealers, CECL will require changes in loan and lease loss recording, which in turn requires changes in the type of loan data collected and how it’s analyzed. This article outlines what BHPH dealers can do to prepare for this sweeping change and why it’s important to start planning now.

Download the Article here: The Impact of New Credit Loss Standards on the BHPH Industry

Finance Competitors BHPH Can’t Afford to Ignore

Subprime lending is alive and well on Wall Street, and not just in real estate. Low interest rates and less consumer demand are prompting brick-and-mortar and online lenders to tap into subprime auto finance more than ever before. Rather than focus on this increased competition for indirect loans, auto industry experts recommend that BHPH dealers focus on operational efficiency and alternative sources of revenue. Dealers who improve cash flow through after-care products and customer retention can ride out the subprime boom. As a bonus, a more efficient dealership will be less reliant on working capital financing in the future.

Download the Article here: Finance Competitors BHPH Can’t Afford to Ignore

How to Add More Structure and Scalability to your BHPH Dealership

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 dealerships in the areas of discounting, reporting, remitting sales tax and customer service — and how to add more structure to efficiently scale up your operation.

Download the Article here: How to Add More Structure and Scalability to your BHPH Dealership

Does Your RFC Make you an IRS Target?

Related finance companies have been around for a long time…and so have the IRS guidelines for valid RFCs that auto dealerships must follow for tax compliance. With increased IRS scrutiny of the relationship between auto dealerships and these finance arms, however, owners and managers need to take a closer look at entity relationships, operational processes and reporting to avoid additional taxes and stiff penalties down the road. We review the pros and cons of RFCs, key areas for ongoing risk management and allowable methods for supporting cash flow and tax deductions.

Download the Article Here: Does Your RFC Make you an IRS Target?

Recent Auto Dealership Accounting Blog Posts:

Auto Dealers Can Fill Gaps Between Inventory and Collections with Smart Debt Management

In the life cycle of any auto dealership, there will be times when cash flow is tight. Buy here pay here dealers in particular face complexity to ensure enough inventory is on hand to attract buyers — and offset that investment with a healthy flow through collections and debt management. This balance is never perfect. Continue Reading →

Fair Market Value Test Can Render Related Finance Companies Invalid

Related finance companies have been around for a long time…and so have the IRS guidelines for valid RFCs that auto dealerships must follow for tax compliance. Like third-party lenders, RFCs can offer to acquire receivables at a 25-40 percent, up-front discount of fair market value (FMV). Problems arise, however, when the discount is not based Continue Reading →

Increasing Cash Flow with Lines of Credit

The average used auto dealership operates differently today than it did prior to 2008. Although margins can be healthier for “buy here pay here” dealers than for market rate dealers, accounting for these dealerships is complex. And cash flow is a constant concern. Dealers must balance inventory investment with collections. Yet, receivables alone don’t support Continue Reading →