Dealership Factory Accounting

“You cannot effectively run, buy or sell a dealership without understanding your dealership’s factory financial statement. Although there are similarities with all statements, manufacturers also have significant differences. A General Motors store, for example, is capitalized differently than a Ford or Toyota store. Blue Sky is treated differently amongst the factories and financial companies.” – John Pico

During more than five decades of consulting with automobile dealerships nationwide, I have found that many costly mistakes result from a misunderstanding of factory accounting rather than poor business decisions.

Manufacturers measure dealership performance differently, lenders evaluate financial statements differently, and buyers frequently overlook accounting issues that can materially affect a dealership’s value.

Understanding these differences is essential before making important business decisions.

Automobile dealership accounting differs significantly from the accounting systems used in most other industries as every manufacturer has its own accounting requirements, financial statement formats, capitalization standards, and performance measurements.

Understanding those differences is essential for dealership owners, accountants, attorneys, lenders, investors, and consultants involved in buying, selling, financing, valuing, or managing dealerships.

As a service to fellow members of the industry, Advising Automobile Dealers LLC has compiled the following resources to promote a better understanding of dealership accounting and financial reporting.

IRS Audit Guide

And, as an assist to Comptrollers and Business Managers, we have the following:

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