Auto Dealer Monthly Magazine is the daily operations publication serving the retail automotive industry. This automotive publication serves dealer principals, officers and general managers with the latest best practices.
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industry expert / accounting correct, you Have to stop and reconcile them. The cash accounts affect many other accounts so obviously, you can't reconcile those accou- tnsuntil all your cash accounts are correct. This doesn't mean you can leave all those unrec- onciled "adjustments" in your reconciliation. There should be nothing in your uncleared de- posits and checks that will not clear in the next month. If any itemswill never clear, then they should not be there. Period! Your receivables and vehicle inventory accounts are nor- mally your largest assets. Make sure you are correctly printing your reports at the end of eachmonth to ensure a proper cut-off and a balance that you can reconcile to your general ledger. Your vehicle inventory should include reconditioning costs in order to be correctly stated for both your financial statements and yourtax return. Your payables need special attention also. Your accounts payable and other payable ac- counts on your general ledger should be reconciled to a sub- sidiary schedule or detail from your system. We normally see many problems in this area because no one has reconciled these throughout the year. Even if you are managing your books on a cash basis for the tax return (RFC only), you should be accounting for your book or GAAP income on an accrual basis so you really know what you are making each year. Next, you need to review your income statement. You should run your year-to-date reports from your software system to check if your account balances for interest income, miscella- neous fee income, earned dis- count income, sales and cost of sales, repo loss, etc., seem reasonable. If not, you could have some journal entry mis- postings you need to correct. After you arrive at a projected balance sheet and income statement and if you still meet your loan covenants, send it to your CPA to review. At this time, if you have losses on one of the companies, your CPA can check to make sure you are able to deduct the loss against any other income you may have. In tax lingo, this means you must have enough income tax basis in the loss company to be able to deduct the loss against income you may have in your other companies. The way you achieve tax basis is by having enough capital, current-year income and/or loans from the owners. All of these can add to tax basis to allow you to offset losses against income on your per- sonal return. Failure to have enough tax basis in a loss year can increase your income tax substantially. One warning: if you have used your loans to the company for prior-year tax basis and then repaid them in the current year, you could incur taxable income even though you have replenished the loan before year-end. This can occur if your loans gave you just enough tax basis to deduct losses in the prior year and you have losses again this year. Your tax accountant can calculate your tax basis for you and let you know before year-end if you are going to have problems. You don't have much time left before year-end to make these types of decisions. So get started today. Don't forget to print your month-end reports to a spreadsheet, a PDF file or both, and archive them in a month-end folder. Printing them to paper will waste a lot of time, paper, ink and storage space, besides scanning them for your accountant just wastes more time. 17