Accountants Understanding The Obstacles

Non-compliance with rules, laws and regulations can cost a dealership a significant amount of money, not to mention the possibility of incarceration.  Here are just a few items you should be aware of:

• You must check the Specially Designated Nationals List (SDN), also known as the “OFAC List,” for every customer you do business with.  If you perform transactions with a “blocked person,” you may be fined between $50,000 and $10 million with the possibility of incarceration.

• The Form 8300 must be filed with the Internal Revenue Service within 15 days of the date the cash was received.  The dealership must also have an anti-money laundering compliance program.  This program must be in writing and be designed to prevent the dealership from facilitating money laundering and the financing of terrorism.  Non-compliance with these guidelines may result in fines of $25,000 to $500,000 and possible jail time.

• Failure to comply with the Federal Trade Commission’s Do-Not-Call Implementation Act of 2003, and subsequent Do-Not-Call Improvement Act of 2007, may cost $11,000 or more.

• The Gramm-Leach-Bliley Financial Modernization Act of 1999 requires companies to give consumers privacy notices that explain the information-sharing practices of the dealership.  These privacy notices must be given to the customer at the time of the initial transaction and on an annual basis if their account remains open.  Failure to do so may cost as much as $11,000.

• The Federal Trade Commission’s (FTC) Used Car Rule requires dealerships to post a Buyer’s Guide on every used vehicle.  If the sales transaction is conducted in the Spanish language, the dealership is required to have the customer sign a Spanish version of the Buyer’s Guide.  Non-compliance can cost you $250 to $11,000 per occurrence.

• Most states require that the title be transferred to the new owner within 30 days of the transaction.  The fines vary by state, contact your local motor vehicle department for details.

Federal regulations regarding documentation and compliance are constantly being implemented and updated. How do you know if your employees are following all of the policies and procedures you have in place?  Let us help you.  Check out our website to see what types of services we provide and what we can do to make your life easier. 

Amber Powell

Developing customer rapport is normally established over long periods of time.  However, in the automotive industry, we typically only have a few minutes to develop a relationship with our customers.  So how do we make a good impression when customers have a pre-conceived notion about how salespeople operate?  Here are a few recommendations:

Since the first impression can make or break a deal start off with eye contact, a smile and a strong hand shake.  An enthusiastic welcome and an outgoing personality show confidence and will assure the customer that they are in good hands.  People want to associate themselves with winners so avoid self-deprecating behavior.  If you believe in yourself and what you are selling, your customers will likely follow suit.

The next step is to find some common ground with the customer.  Ask questions about their occupation, their family and their hobbies.  Find something that you and the customer can both relate to and build your relationship from there.  Maybe you both grew up in the same area or you are both fans of the same baseball team.  Whatever it is, use that bond to help your sale.

Use the customer’s occupation and hobbies to your advantage.  For example, if the customer is an engineer or banker, chances are they will be focusing on the numbers.  If your customer is a soccer mom, point out the safety features and all of the storage area the vehicle offers.  Tailor your presentation to the customer rather than using a generic sales pitch.

One of the most important things you can remember is to never prejudge someone coming into a dealership.  If a man drives a beat up old truck and is wearing dirty jeans and an old t-shirt, don’t assume that he is broke.  He could be the owner of a construction company and just left a job site.  He could be coming in to buy a new pick-up for work or a nice sports car for the weekend. Treating all of your customers with the same respect will show that you genuinely care about them.

Following up with your customers will ensure that you are at the forefront of their thoughts.  Send them a thank you note, a short email or a friendly phone call to remind them that you are there to help.  This will also help you to maintain your relationship with your client whether they purchase a vehicle today, next month or next year.

Happy selling!!!

Amber Powell

For years, car salespeople have been issued cash “spiffs” as an incentive to sell, sell, sell!

Salespeople generally get excited to “win” a spiff and nothing beats a little cash in hand to make your weekend a little brighter but the reality for most dealers is that the majority of the cash they have designated as spiff money is being misappropriated.

Back in the heyday of big weekend unit sales it was not unusual to issue cash of $1,000 or more to management to use to giveaway to the sales department for their efforts.  Today there is still nothing wrong with doing business this way but it is in your best interest to adjust that figure and implement some controls.

The following are some guidelines to help you keep the spiff contests honest and prevent fraud in your dealership:

1. Determine a reasonable, maximum amount you wish to designate for the weekly spiffs.
2. Designate ONE manager to be in charge of spiffs and have them sign off when receiving the monies.
3. When issuing cash to the designated manager, the accounting department should set up a receivable for tracking purposes rather than take monies from a cost of sales account.
4. A spreadsheet or spiff voucher should be used for EVERY spiff distributed and should be signed by the salesperson receiving the spiff as well as the authorizing manager.
5. Any excess cash should be returned to the accounting office on the following Monday morning along with the supporting documentation (spreadsheet and/or spiff vouchers).
6. Spiff monies should only be used for spiffs.  The monies should not be used for any other expenses such as lunches, gas, etc. 
7. No additional cash should be issued to the designated manager until all previous monies are accounted for.
8. The accounting office should promptly post the spreadsheet/vouchers to credit the original receivable and then set up a receivable to the proper salesperson for payroll purposes.  (All cash spiffs should be taxed through payroll.)
9. Keep a monthly spreadsheet of spiff activity to track the amount of spiffs issued and use as a tool to determine the effectiveness of spiffs as well as what amount should be issued weekly.

Jennifer Enck

The year is 2010 and we are surrounded by an amazing amount of technology yet dealerships are still doing things the “old fashioned way” by using outdated mailers to try and drive service traffic.

Email marketing is an easy way to increase service traffic and cut advertising dollars at the same time.  With a little bit of commitment and consistency it is possible to increase traffic 25% or more yet most dealerships are not currently using any form of email marketing. 

The time is now to implement some procedures to obtain your customers’ email addresses.  Training service advisers and cashiers to ask for email addresses is the fastest and easiest method in obtaining your database.  Another sure-fire way is to add a link on your paper marketing where customers can sign up for email coupons and special marketing.  Going forward, tell customers that you will be phasing out paper marketing in and would like to keep them informed of the specials available.

The beauty of email marketing is that you do not have to hire a company to perform the marketing for you.  In a few minutes you can create effective campaigns and send to all of your customers with a click of a button.  As you build your database of email addresses, focus on sending out emails geared towards specific specials or models.  This will allow you to track campaigns to see how well the marketing is working for you without having to spend money on print ads and postage.  There are many companies you can use to send out your own email campaigns and they can provide reports tracking the amount of emails opened and clicks to links on the email etc so you can see at a glance what is working and what is not working for you.

Jennifer Enck

The car business has taken its share of hits the past year and now more than ever it is imperative for dealers to keep customer retention and satisfaction high.  Ask yourself these questions: 

1) Have we lost sight of what makes our customers happy and want to return to our dealerships to spend their hard earned money with us? 
2) We have focused on selling units to satisfy our own needs rather than those of our customers?
3) Have we lost customers in our fixed operations department?
4) Have we neglected to follow up with “orphan owners”?

If you answered YES to these questions, its time to go BACK TO BASICS!

• Be honest.
• Pay attention to the needs of the customer.
• Ask questions.
• Repeat customers’ needs to confirm.
• Be an active listener.
• Don’t make assumptions.
• Control the call.
• Be friendly.  A smile goes a long way.
• Be the contact.  Don’t pawn off the customer. 
• Assume responsibility.
• Follow up.

Any of us that have been in the car business have had the above points drilled into our heads but when was the last time we actually applied them?  Sadly when we lose the focus of customer satisfaction it can adversely affect our business.  People will always remember and share the negative events/encounters they have had at your place of business.  Now is the time to strive for only positive encounters.  The more happy customers you have, the more referrals and repeat business you will have. 

Jennifer Enck

According to the Association of Certified Fraud Examiners, U.S. businesses lose $660 billion each year to embezzling.  The unfortunate reality is that this figure is most likely much higher.  Many businesses don’t report the crime because they are too embarrassed or don’t want the negative press.  The fact is that embezzlers along with stealing money also steal morale, self-esteem and trust. 

The common thread in most embezzlement cases is that too much financial control is placed in the hands of one person.  Embezzlers tend to bring good business skills to the table, are methodical, precise and organized.  Sadly what appears to be a model employee can turn out to be your worst nightmare and the person you should trust the least.

Here are a few simple steps that can be implemented in your business to protect yourself from embezzlement.

• A Tip Line – Setting up an anonymous hotline to report possible fraud is one of the easiest yet most overlooked ways to catch and prevent fraud.  If you publicize the hotline to employees, customers and vendors you are creating a standard that expresses that fraud will not be tolerated.
• Multiple Check Signers – Always require more than one check signer for check disbursements.  When only one signature is required it makes it much easier to be tempted.
• Review Checks and Statements – Owners should have bank statements and cancelled checks sent to their home address.  This will give you a chance to review the documents but can also deter fraud because the potential embezzler could view the chance of getting caught as too great.
• Watch Lifestyle Changes – Be attentive to changes in your key employees’ lifestyles such as new homes, cars and jewelry. 
• Set the Example – If you do come across a fraud situation it is always a good idea to properly report and reprimand the employee.  By making it known there is no tolerance for fraud you are setting the tone for other employees to be on their best behavior as well as helping fellow business owners from potentially being burned by the same employee down the road.
• Segregation of Duties – Applying a series of checks and balances by segregating pieces of one duty to multiple employees greatly reduces the chance of fraud.  For example, the same person receipting monies should not be the same person creating the deposit and/or completing the bank reconciliation.

Sadly most embezzlement stems from a feeling of resentment and a sense of entitlement combined with access to company resources.  As a business owner it is important to be able to trust but to also implement safeguards to protect your assets.

Jennifer Enck

Risk Management – is not just slip, trip and fall concerns.  There is more than meets the eye.

We have all heard many of the horror stories about accidents that happen at stores and these accidents cause the dealership to spend a lot of time and money to resolve the incident.

Have you ever thought about managing the risk of not making as much profit as the store should?  I have seen too many times “Risk Management” focuses on insurance expense and lawsuit control.  It is rare that I have seen stores worried about the risk of losing upside potential.  I am here to challenge us all to think of and keep “front of mind” the profits lost with poor or nonexistent oversight policies.  I also have seen many stores who have good oversight policies but poor execution of the plan.  Doing so leaves the dealer with a false sense of security and thinking all profits being available to be captured, in fact aren’t.

Let’s focus on the basics – Most of what we do in dealership operations is relatively easy.  If you don’t already have one; create standard inspection forms for managers to sign off. 
For example:

• Closing repair orders
• Deal summaries
• Accounting schedule summaries on key accounts
     o CIT
     o Cash clearing
     o Warranties
     o Etc.
• Gross margin percentages
• Other key indicators

Put the burden of reporting on the managers.  These inspection forms should include explanations provided by the managers.  The more emphasis and expectations that are placed on the department managers, the better and more profitable each department will perform.

Let’s make the most out of what we have!

Donny Kretschmar, CPA

At some point in their career, almost every manager will be forced to terminate one of their employees.  The process is difficult for both the employer and the employee, however, following these guidelines may help you avoid a wrongful termination lawsuit:

Establish Clear, Well-Documented Policies and Procedures – Every employer should have an employee handbook that specifically states what is expected of the employee and what behaviors will not be tolerated.  The employee should sign an acknowledgment of receipt form to ensure the employee’s understanding of the policies and procedure in order to prevent potential future litigation.

Document EVERYTHING – Every time an employee fails to follow company policy, a record of the violation should be kept in their employee file.  The documentation should include the date and time of any performance related discussion along with the policy violation or performance issue clearly identified. 

Have a Pre-Termination Review Session – Analyze the documentation included in the individual’s file to verify the information is thorough and accurate.  Plan out (see “Termination Checklist” below) and practice what will be said in the termination meeting.  Be ready to answer any questions the employee may have regarding the termination as well as future benefits and insurances.

Create a Termination Checklist and Utilize Standard Termination Procedures – A checklist will ensure that all terminations are performed in a consistent manner and that the essential information is communicated between both parties.  The checklist should also include an agenda for the termination meeting (see below).

Prepare a Termination Letter – The letter should state the date of and reason for termination.  It should also include any arrangements made between management and the employee relating to severance or other agreements. 

Have a Termination Meeting with the Employee – If there have been numerous verbal and/or written warnings, an employee should not be surprised by their termination.  Along with your human resources manager, explain to the employee the reasons they are being terminated.

Prepare a List of Items to be Returned upon Termination – Be sure to collect keys, credit cards, software and other company property prior to the employee leaving the premises.  Recovering it after the employee is gone will prove difficult.

Terminating an employee can be an uncomfortable and unpleasant experience for both parties.  Following the guidelines listed above will simplify the termination process and may also help avoid any legal issues.

Amber Powell

Don’t you just hate dealing with payroll taxes?  This is one area a lot of my clients don’t like to deal with.  I have had several clients over the years outsource this to a third party vendor such as ADP or Paychex.  The biggest reason most people don’t like payroll taxes is because of the potential penalties that come with it for not paying them timely and filing the correct payroll forms such as the quarterly 941 and year-end W-2s.

Using an outside source to process payroll can save you a lot of money in penalties because they take the responsibility of making sure the taxes are paid in a timely manner and all forms are filed correctly.  If for some reason the taxes are filed late they will have to pay the penalties.

If you have payroll done in house, make sure the person responsible for the payroll deposits understands the deposit rules and deposits are being done timely.  I suggest having someone other than the payroll clerk test the payroll deposits randomly throughout the year.  I also suggest the payroll clerk keep a log of all payroll deposits.  This log will be very useful when filing the forms at the end of each quarter.

The general ledger accounts for payroll withholding should also be monitored.  Reviewing the general ledger accounts after each payroll and payroll deposit will help you to ensure the taxes are paid timely. 

Remember…missing the deadline for payment of payroll taxes and submission of forms can be a very costly expense. 

 Kane Lavin, CPA

An IRS form that somehow seems to slip through the cracks at many dealerships is the 8300 form.  This form is used to report cash payments received over $10,000 in a trade or business.  It is not uncommon for retail or wholesale customers to pay cash when they purchase automobiles.

The following are guidelines in dealing with 8300 forms:

Who must file

Any person engaged in trade or business who, in the course of that trade or business, receives more than $10,000 in cash in one transaction or in two or more related transactions.

Definitions of cash

U.S. and foreign coin and currency

A cashier’s check, money order, bank draft, or traveler’s check having a face amount of $10,000 or less that is received in a designated reporting transaction, or that is received in any transaction in which the recipient knows that the instrument is being used in an attempt to avoid the reporting of the transaction under either section 60501 or 31 U.S.C. 5331.

It should be noted, cash does not include a check drawn on the payer’s own account, such as a personal check, regardless of the amount.

When to file

File form 8300 by the 15th day after the date the cash was received.  If the 15th falls on a Saturday, Sunday or a legal holiday the form should be filed on the next business day.

Where to file

File the form with the Internal Revenue Service, Detroit Computing Center, P.O. Box 32621, Detroit, MI 48232.

How long to keep

Keep a copy of each form 8300 for five years from the date you file it.

Statement to be provided

You must give a written or electronic statement to each person named on a required form 8300 on or before January 31 of the year following the calendar year in which the cash is received.  The statement must show the name, telephone number and address of the contact for your business, the aggregate amount of the reportable cash received and must explain the information was furnished to the IRS as required.  Keep a copy of the statement for your records.  I recommend sending the statement at the same time the form is filed with the IRS.

Kane Lavin, CPA