A most important accounting function for a new-car dealership is the accurate and prompt preparation of bank reconciliations.
But most dealers are not qualified to determine if this is being done, says certified public accountant Carl Woodward of Woodward and Associates, specializing in dealership accounting matters.
“We have heard office staff tell dealers the bank reconciliation was done when it has not been done,” he says. “We have heard the question, ‘Is the bank reconciliation up to date?’ answered with, “I check the checks and deposits daily-weekly-monthly.'”
Despite such reassurances, it turns out many reconciliations just aren't done that conscientiously.
Woodward says he has seen several significant accounting and dealership problems linked to the absence of bank reconciliations.
If dealers had known about that absence, “investigations into this matter would have yield knowledge of other accounting and operational problems,” he says.
One way to avoid all that if for an outside CPA to inspect bank accounts to determine if they are indeed reconciled. If the aren't, the dealer principal needs to know immediately, Woodward says.