By Steve Lane
Cash is the lifeblood of your business. Risky deals can cripple your cash flow. That’s why controlling the dealership’s collection of receivables is vitally important.
When times were tough, a lot of dealers and managers took promissory notes and hold checks. But if a check goes south and is returned, it’s very difficult to collect.
And as the receivable gets older, it becomes even harder to collect. It could end up being a write-off. That is intolerable: We work hard for the gross and then we give it away by writing it off because we can’t collect.
We have to get paid. At the end of the day, we haven’t consummated a sale until the money is in the bank.
Pick up the phone, use email, faxes—focus on getting the money owed you in the house quickly. Stick to NADA’s aging criteria guideline for vehicle receivables: Three days or fewer. Don’t accept a ten-day hold check or a 30-day promissory note.
Another suggestion: Don’t co-mingle other funds with vehicle receivables and don’t put all of your vehicle receivables in one account. Set up separate sub-accounts for retail, wholesale, dealer trades, and fleet deals. Have them all side by side and scheduled by control number. That way, when you look at one column on your schedule, it’s only one type of transaction.
Dealers tend to make it more difficult than it needs to be to manage the account.
To find out how your dealership‘s compensation stacks up to the competition, participate in the 2013 Dealership Workforce Study. Participation is open only to NADA and ATD members, and the participation window closes June30. Go to now.
Instructor Steve Lane teaches Financial Management in week 1 of 6 in the program. Reach him at [email protected] or visit to download the schedule and applications for all programs.