Car Dealership Accounting: How Reconciliation Helps You Find Errors, Fraud, and Better Ways to Do Business

In a car dealership accounting office, reconciliation can play a major role in improving profits.

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Like most types of businesses, auto dealerships have quite a few different departments that work together to ensure things run as smoothly as possible. From sales to financing to service, the internal workings should be well-oiled and seamless. There is one department, however, that plays a critical role in the overall success of a car dealership: accounting.01-Car Dealership Accounting- How Reconciliation Helps You Find Errors, Fraud, and Better Ways to Do Business-01

At the end of the day, dealerships are businesses and businesses exist to make money. A car dealership accounting department is responsible for those funds and keeps track of all money coming in and going out. There are a lot of moving parts, and it is hard work – especially for some smaller dealerships that have accounting departments made up of one or two people.

It can be difficult managing a car dealership accounting office, but one of the most effective ways to monitor cash flow is through reconciliation.

Reconciliation is when you check two records to make sure they are in agreement. For example, you would check to see if certain transactions documented in your general ledger also appear on your monthly bank statement. It is a way of double checking deposits, bill payments, and other financial transactions to ensure every cent of your money is where it should be.

Reconciliation in car dealership accounting helps find errors and fraud

Reconciliation is a way to catch errors when they aren’t so obvious the first time around. When reconciling accounts, you may discover:02-Car Dealership Accounting- How Reconciliation Helps You Find Errors, Fraud, and Better Ways to Do Business-01

  • That numbers were accidentally reversed when they were first documented. For example, a deposit may have been written down as $93, when it was actually $39.
  • A simple error in calculation that may have occurred because the employee hit the wrong button on the calculator.
  • Entries are reversed—for example, an account was credited, but it is listed as debited, and vice versa.

Likewise, reconciliation can also help you catch any instances of fraud—especially fraud happening internally. Some dealerships choose to have a third party or a different employee perform the reconciliations so that the same person isn’t handling all of the dealership’s accounting all the time. When one person has total control over the books, they may be tempted to pocket a few checks or skim some money off the top.

Reconciliation can also catch fraud in the service department because it is not unheard of for employees to steal parts and sell them outside of the dealership.

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Staying on top of reconciliation can be tedious, but the benefits to your business are undeniable. By creating consistent internal controls, you will be able to avoid major errors or problems that could cost your dealership a lot of money. Regular reconciliation allows you to catch issues in a timely fashion, address them, and move on before any real damage has been done.

Reconciliation will keep your books perfectly balanced so you can get a clear picture of your dealership’s finances, including how money is being spent and where you may be able to budget more appropriately. It could shine a light on processes that are working (and those that aren’t) and allow you to tweak your dealership’s spending in a positive way.

A high-functioning car dealership accounting department with a streamlined reconciliation process — one that doesn’t just go through the daily motions while juggling countless tasks — will be steps ahead of the competition and poised to make a significant profit.

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Ty Webb
Ty Webb

Ty was born and raised in the automotive world. He's an enthusiastic expert who writes exquisite content about cars, automotive sales, and dealership best practices. When not writing for AutoRaptor, you'll find Ty on the golf course.