Why does it take so long to close the books? Why can't the accounting department stay caught up? Well, there's no reason it should take more than three days to close month-end books, even for big dealerships.
It just takes commitment and cooperation from all departments.
The primary commitment comes from the accounting and sales departments. Accounting must commit to being organized. Sales must adhere to a strict deal cutoff. All departments should stay current and proactive.
The accounting department must do the following:
- Perform daily bank reconciliations that highlight problems as they arise.
- Detect and correct problems as the month progresses vs. waiting until month end to even know there are problems.
- Divide and conquer. The controller needs to involve all staff in the department, designating certain accounts and schedules for each person to monitor.
- Review and correct schedules weekly.
- Utilize standard monthly entries and post them at the beginning of the month.
- Monitor daily the deals that have hit the finance and insurance system but haven't arrived in accounting. Keep management informed of missing deals. That increases the heat.
- Run trend analyses weekly looking for variances in expense accounts. The controller needs to work with other department heads to address problems and discrepancies during the month.
- Stay neat and organized. Disarray slows the process.
The sales department should do the following:
- Adhere to a strict cut-off of car deals. This is crucial! This is where the dealer must enforce the rules. Most deals should arrive in accounting on the same day. Noon the next day should be the outside limit.
- Follow a schedule by which at month end, all deals must be in accounting my noon the next day. If a deal doesn't make it by then, it goes in the next month.
Other department heads need to:
- Monitor the DOC and address problems daily.
- Review expenses weekly, solving discrepancies timely.
- Monitor the open repair order report.
The controller should follow this checklist to accomplish the three-day close.
Before the last day of the month:
- Spend more time with F&I.
- Purify all schedules, except the vehicle schedules.
- Make all standard entries at beginning of the month.
- Review the open repair order and parts tickets and close all possible tickets.
- List all deals not in accounting on the last day of the month.
Now for the three-day close.
- Provide the sales department with a list of all deals not in accounting by 9 a.m.
- Give parts and services managers a finalized sales DOC.
- Post all accounts payable to inventory accounts.
- Don't let the accounts payable clerk go through vendors in alphabetical order. Spend time with larger vendors first.
- Cut off car deals at noon.
- Reconcile vehicle deals in the office with deals in the F&I department.
- Post all car deals by noon.
- Enter the remaining accounts payable invoices.
- Post final payroll.
- Print schedules at lunch.
- Obtain flooring interest charge for the month.
- Post the remaining general journal entries.
- Run a DOC and accrue bonuses.
- Post final bonus general journal entries.
- Print mini-schedules and report at lunch.
- Obtain personnel counts for every department from payroll.
- Make memo entries and print financial statement.
- Make backups and print hard copy information.
It isn't just accounting that makes a three-day close work. It takes teamwork.
John A. Davis is a CPA with Dixon Hughes PLLC. He's at 404-575-8910 and [email protected].