Every business faces unexpected events which can strain its bank balance; the trick is to be prepared for them. Stop-sell orders could destroy your annual forecast for new and used sales. A tornado or a hailstorm could put a dent in your vehicle sales, and tie up cash while you wait for the insurance check. A significant increase in the factory Customer rebates, along with an aggressive sales campaign, could boost your sales to the point where you are stretched for cash because your profits came from factory money and, IT’S NOT HERE YET – but everyone wants to be paid—NOW! These are just a few of the potential times when all of a sudden, “Where did all our cash go?” The financial statement’s balance sheet shows the two main areas to look for that money – Receivables and Inventories.

When it comes to the financial statement, most managers see their role to make the profit and control the expenses. Cash flow is low on the list of priorities, after all, isn’t that accounting’s responsibility? Actually, cash flow should be everyone’s responsibility. For subscribers to the Profit Blueprints© system we analyze key accounts to save you time in monitoring your asset accounts. Not only do we track the monthly balance; we put it into perspective by comparing the balances to the appropriate sales accounts and show you how much cash, if any, is tied up in frozen assets.

To keep frozen assets in check, be familiar with the schedules and the accounts to understand where cash could potentially be hiding.

VEHICLE INVENTORIES

• Review the aging of your inventory, always be looking for “a sale” for the older vehicles. What are we doing to sell the five (or 10) oldest vehicles?

• For new vehicle inventory, review the combination schedule that includes the inventory detail and the floor plan amount to confirm all vehicles are floor planned. For most dealerships, vehicles are floor planned. If that is your policy, make sure dealer trades are either sold or floor planned promptly.

• Look at your day’s supply of vehicles, either on the last page of your Profit Blueprints Report or on your own internal spreadsheet. Keep in mind handling costs and missing out on potential bargains are just two of the costs you pay if your inventory is too heavy.

• Walk the lot; inspect the vehicles for faded stickers and cleanliness. Ask the question, “If I were a potential customer, would this vehicle appeal to me?” Don’t let “ugly” vehicles take up space and tie up your money.

•When short of cash – floor all of the used vehicles that you can, then pay them off when you get caught up in the bank.

Bottom-line: Don’t fall in love with a used vehicle and hope to sell it, if it hasn’t sold after 45 days. Sell it, free up the cash and move on to a better return on your investment.

RECEIVABLES

Confirm that you will be paid, before you extend credit. Review the following Receivables Schedules weekly and follow-up with past due amounts.
 Customer deposits, full payments and drafts
 Finance Contract Receivables
 Factory Rebates and Incentives. These could easily get out of hand or charged back if we have sloppy paper work. Clearly defined processes and continuous updates to staff will help collect and keep the factory money.
 Finance Reserve Receivables. This should be reconciled when paid or the amount due is acknowledged by the finance source. If there is a shortage, ask the finance manager to determine why and then adjust accordingly.
 Service Contract/Programs Refunds. Any money you are expecting should be on a schedule. When you refund a Customer, make sure you follow through and get your portion refunded also.

SALES PROCESSES

• Move the deals from Finance to Accounting quickly. Eliminate bottlenecks and monitor pending deals daily. The faster the deal gets to Accounting, the faster contracts are cashed, the faster the trade-ins are sold, and the faster the cash gets to the bank.

• Make the decision on trade-ins when the vehicle is brought into inventory. Retail or Wholesale – those are your choices.

Each department manager has the responsibility to keep the cash flowing. Review your responsibilities for your department’s cash flow. With good processes and continuous monitoring, the bank account will be flush and you can focus on selling more vehicles and controlling expenses.