Controlling Dealership Collection of Receivables

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.

 

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