Auto Dealership Accounting

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 Articles

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.

cover-finance-competitors-bhph-cant-afford-to-ignoreFinance 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.

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.

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.

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.

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.




 Recent Auto Dealership Blog Posts:

5 Tips for Managing Inventory

If you’re like many dealers, your vehicle inventory may have yo-yoed over the last few years. You likely experienced a glut of new cars during the recession, while used cars generally continued to move — sometimes with not enough supply to meet the demand. Then, typically, your manufacturer adjusted production, sending fewer cars — and … Continue reading 5 Tips for Managing Inventory

A Strong Offense Can Ward Off an IRS Audit

No one likes to be audited by the IRS. It costs time and, thus, money — even if no additional tax, interest or penalties are assessed — and it’s stressful. So, what can your dealership do to avoid an IRS audit in the first place? It’s simple: Don’t attract unfavorable IRS attention. Reviewers can’t audit … Continue reading A Strong Offense Can Ward Off an IRS Audit

Are You Savvy About F&I Employee Fraud?

A few years ago, several employees from the same dealership were convicted of defrauding their customers, lending institutions and warranty companies, and some received stiff prison sentences. Their crimes — many originating in the finance and insurance (F&I) department — could repeat themselves in your dealership if you aren’t aware of the possible F&I schemes. … Continue reading Are You Savvy About F&I Employee Fraud?

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Contact our Dealership Specialist

Call us to arrange an appointment at 972-202-8000.

Mike Rizkal, Audit Partner

As a Partner in Cornwell Jackson’s Audit and Attest Service Group, Mike specializes in providing a variety of services to privately-held middle market businesses, with a focus in the construction, real estate, manufacturing, distribution, professional services and technology industries. View our Auto Dealership Blog [/su_column] [su_column class="widget"]

Dealership Client Testimonial

When we found Cornwell Jackson, our dealership was searching for a CPA firm that A) knew our complicated industry well and B) would take the time to give us customized and personal service.  We've experienced accounting firms that didn't understand Buy Here Pay Here at all.  We've also experienced firms that know BHPH, but are so big they are not able to offer personalized service and help us creatively solve problems--they would rather try to fit our business into a "one size fits all" model. The personalized attention and prompt responses from Mike Rizkal to all of our emails and calls is unmatched. The team at CJ has the right combination of industry expertise coupled with a client-focused, bespoke service.

- Matthew Burton, Adonis Auto Group