industry expert / accounting
A Lesson in Inventory Management
David Keller, CPA, CFE, is a partner with CliftonLarsonAllen, a top 10 nationwide CPA firm with extensive experience in serving the new, used, heavy truck, utility trailer and buy-here pay-here industries. Contact him at 314.925.4317.
DKeller@AutoDealerMonthly.com
Cash is a form of inventory. You have to manage how much you have. You have to restock on a regular basis. You have to make sure you have enough cash or your sales will most likely be lower than normal. You have to make
H
ave you ever thought about how much cash you have in inventory?
sure you don't overstock or you could wind up with a lower return on investment in your business. The only good thing is, you don't have to worry about cash falling out of popularity.
New vehicles are either pur- chased from the factory or other dealers. Some dealers
stock certain vehicles they know will work for dealer trades so they can get a spe- cific vehicle for the customer when they need it. Have you ever tracked the number of dealer trades as a percentage of your sales or current inven- tory? You may be surprised to find how large the percentage of vehicles sold you had to dealer-trade for. If this is the case, should you change your ordering patterns to more closely align with the number of dealer trades you have to go get versus what you order for stock? Makes sense to me, but I don't see many dealers reviewing their ordering
practices to adapt to this idea.
A dealership's used vehicle inventory has become a full- time job to manage. All I hear from dealers in different parts of the country is they can't find the vehicles they need. They buy vehicles in a multitude of ways, such as from online auctions, brick- and-mortar auctions, other dealers, advertising to the public, trade-ins, Internet sites, etc.
Why am I giving you a lesson on inventory that you already know? Inventories are all about processes. Do you have
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