Digital Dealer - January 2019 - 28

D E A L E R OP S & M ANAGEM ENT: F ixe d Oper at i ons

By Scott Lewis
CPA, Partner, Firm Leader
Dealer Services,
Rosenfield & Co.

The Art and
Science of
Parts Inventory
Reconciliation
While consulting with
parts department
managers and owners on
the recording and reconciling of parts inventories for
many years, our firm has
seen unusual activity and
trends as they pertain to
these inventories in new
vehicle dealerships. In the
last couple of years, we
have observed physical

parts inventories, in some
instances 30% higher in
dollars than the accounting
inventory on the dealer
financial statements. This is
contrary to normal operations where the parts
physical pad and accounting
records should be very close
in amounts. If parts are
being reconciled on a
regular basis, as they should

be, and you are seeing
discrepancies, proactive
steps should be taken.

RECONCILE THE PHYSICAL AMOUNT OF YOUR
INVENTORY TO YOUR
ACCOUNTING RECORDS

as part of your month end
close. As your fixed operations represent a higher
gross profit percent compared to your vehicle sales

and are so important when
it comes to the service absorption to cover your fixed
expenses, parts inventories
are a valuable component
of your balance sheet, and
should be equated to cash,
to be reconciled on a regular
basis. Some dealerships
reconcile cash daily or
weekly. There's no reason
why, at least on a monthly
basis, that this cannot be
done for parts.
The actual mechanics
involved are very similar to
a bank reconciliation. You
can start with the parts pad
amount, add back any work
in process parts on unclosed
repair order and parts ticket,
adjust by any purchases
that haven't been recorded
in accounting, account for
any appreciation or depreciation coming from the
manufacturer parts pricing
updates (which should be
recorded on a regular basis).
This should bring you to the
accounting amount. Or this
can be done in reverse starting from accounting. There
shouldn't be any differences.
We have heard from parts
'experts' that a difference
of 2% to 3% is okay. Would
it be okay if your bank
accounts were 2% to 3%
different from your general
ledger cash accounts?
IN ADDITION, WITHIN THE ACCOUNTING
OFFICE, THE TRADE
PAYABLES ASSOCIATED
WITH FACTORY PARTS
SHOULD BE RECONCILED
AGAINST THE FACTORY
"PARTS STATEMENT"
TO ENSURE THAT THIS
TIES OUT AS WELL. This

should be done by someone

28

JANUARY 2019

D I G I TA L D E A L E R . C O M



http://www.DIGITALDEALER.COM

Digital Dealer - January 2019

Table of Contents for the Digital Edition of Digital Dealer - January 2019

Digital Dealer - December 2018
Contents
Message from the Show Director
6 Facing Sales Slump, Automotive Brands Can Win by Adding Real-World Value in the Digital Shopping Journey BY Brian Solis
7 Reasons for a 2019 Social Media Policy Review
'OVER-THE-TOP' Advertising! BY Jim Boldebook Dealer Ops
Buy/Sell Trends Expected in 2019
The Two Non-Negotiable Pillars of Accountability
7 Questions to Ask When Hiring a Customer Service Trainer
How to Add $1.0MM to Your Bottom Line Profits
The Art and Science of Parts Inventory Reconciliation
Trade, Tariffs, and Labor
Building Your Business by Building Your People!
Great Service Managers Follow a 4C Approach
Collision Shop Liability Is a Serious Issue for All – Read This!
Does Your Store Exemplify Consistency & Excellence or Complacency & Mediocrity?
Increasing Service Business Through Convenience – A Tactical Approach
5 Questions That Are Missing from Your F&I Customer Interviews
How to Drive Sales with Predictive Analytics BY JOHANNES GNAUCK
Digital Dealer - January 2019 - CT1
Digital Dealer - January 2019 - CT2
Digital Dealer - January 2019 - Digital Dealer - December 2018
Digital Dealer - January 2019 - Cover2
Digital Dealer - January 2019 - 1
Digital Dealer - January 2019 - Contents
Digital Dealer - January 2019 - 3
Digital Dealer - January 2019 - Message from the Show Director
Digital Dealer - January 2019 - 5
Digital Dealer - January 2019 - 6 Facing Sales Slump, Automotive Brands Can Win by Adding Real-World Value in the Digital Shopping Journey BY Brian Solis
Digital Dealer - January 2019 - 7
Digital Dealer - January 2019 - 7 Reasons for a 2019 Social Media Policy Review
Digital Dealer - January 2019 - 9
Digital Dealer - January 2019 - 'OVER-THE-TOP' Advertising! BY Jim Boldebook Dealer Ops
Digital Dealer - January 2019 - 11
Digital Dealer - January 2019 - 12
Digital Dealer - January 2019 - 13
Digital Dealer - January 2019 - 14
Digital Dealer - January 2019 - 15
Digital Dealer - January 2019 - 16
Digital Dealer - January 2019 - 17
Digital Dealer - January 2019 - Buy/Sell Trends Expected in 2019
Digital Dealer - January 2019 - 19
Digital Dealer - January 2019 - 20
Digital Dealer - January 2019 - 21
Digital Dealer - January 2019 - The Two Non-Negotiable Pillars of Accountability
Digital Dealer - January 2019 - 23
Digital Dealer - January 2019 - 7 Questions to Ask When Hiring a Customer Service Trainer
Digital Dealer - January 2019 - 25
Digital Dealer - January 2019 - How to Add $1.0MM to Your Bottom Line Profits
Digital Dealer - January 2019 - 27
Digital Dealer - January 2019 - The Art and Science of Parts Inventory Reconciliation
Digital Dealer - January 2019 - 29
Digital Dealer - January 2019 - Trade, Tariffs, and Labor
Digital Dealer - January 2019 - 31
Digital Dealer - January 2019 - Building Your Business by Building Your People!
Digital Dealer - January 2019 - 33
Digital Dealer - January 2019 - Great Service Managers Follow a 4C Approach
Digital Dealer - January 2019 - 35
Digital Dealer - January 2019 - Collision Shop Liability Is a Serious Issue for All – Read This!
Digital Dealer - January 2019 - 37
Digital Dealer - January 2019 - 38
Digital Dealer - January 2019 - Does Your Store Exemplify Consistency & Excellence or Complacency & Mediocrity?
Digital Dealer - January 2019 - 40
Digital Dealer - January 2019 - 41
Digital Dealer - January 2019 - Increasing Service Business Through Convenience – A Tactical Approach
Digital Dealer - January 2019 - 43
Digital Dealer - January 2019 - 5 Questions That Are Missing from Your F&I Customer Interviews
Digital Dealer - January 2019 - 45
Digital Dealer - January 2019 - How to Drive Sales with Predictive Analytics BY JOHANNES GNAUCK
Digital Dealer - January 2019 - 47
Digital Dealer - January 2019 - 48
Digital Dealer - January 2019 - Cover3
Digital Dealer - January 2019 - Cover4
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