Is Your Accounts Department Generating Additional Revenue?

Yes, you read it right!

The Accounts Department of your business can also generate income. No doubt, it's indirect income. We, as dealers, always take Sales, Service, Spares, Accessories, Insurance & used cars as revenue generators. But our Accounts Department can be the most significant catalyst in improving revenue from these departments. Improving one’s accounting processes leads to less time wasted by accountants. It can also result in increased loss prevention and improved revenue flow.

Just for easy understanding of the concept, whenever a vehicle comes for service, the job of a meticulous Service Advisor is to identify the repair jobs which the customer has missed, ask for approval, and get the job done. This process is symbiotic- the vehicle is maintained efficiently, and the dealership's revenue also increases.

The value of money, i.e., interest, is never taken seriously by any other department than Accounts. All the other departments focus on completing targets and maximizing sales. However, the biggest priority of the Accounts Department should always be to have the receivables ready in time and follow-up on the same, and believe me, this is not just additional revenue; it also improves the efficiency and productivity of other departments. It is known that the recovery of outstanding takes more effort than selling products. 

It is very common for accounting personnel to become so bogged down with their daily tasks that they get behind on reconciling critical accounts. Employee turnover and undertrained staff can compound the problem, further deprioritizing reconciliations.

It is really important to pay close attention to monthly reconciliations, including bank reconciliations, inventory reconciliations, & vendor reconciliations. When you’re not reviewing reconciliations on a regular basis, errors and fraud can go undetected, and poor management decisions are made based on the wrong data.

The accounts department manpower should be trained enough to prepare profitability at the minutest (micro) level. This includes assessing the impact of each car sold, each employee, each department and every single transaction on the profit. Moreover, the management should also empower the Accounts Department with a clear mandate to audit the workings of the business.

If your employees are not working efficiently, your money is not being managed efficiently. These micro reports help the leadership team to improve the efficiency of the manpower, which in turn will improve profitability.

But for getting the most out of Accounts Department, you also have to invest in it. Many accounting processes, such as manual data entry, report generation, and manual bank reconciliation, are highly redundant and waste a lot of time and money. This also increases your dealership's vulnerability to fraud & embezzlement. If your DMS & accounting software are not one, it is recommended to get the bridge software made for the transfer of all entries from DMS to your accounting software. This will also enhance your confidence in the accounts department and correct all the issues.

One should also not link the incentives of the Accounts office to the Sales or Service Department. This creates a conflict of interest, and at times, forces the accounts team to be lenient in auditing. The Accounts department should have their incentives linked to receivables ageing, inventory ageing, reconciliations and mistakes identified (not terming as fraud, as not all are fraudulent). There should also be some mechanism where these can be quantified. 

After a period of time and when the dealership is set on a sound footing, earning money is easy, but managing cash and compliances become the most challenging task. An efficient accounts department is the most important asset and can greatly impact your business profitability.