It's Here! Time to Get Going!January 05, 2011
Yes, another year is here. Whether you are ready or not, time will keep going. It is time to figure out how you are going to use it to maximize your financial strengths and minimize your financial weaknesses. With these thoughts in mind, take a good look at your accounting and financial status. Your managers and other staff may be a good place to start. Ask them what they think your financial strengths and weaknesses are. If your accounting records aren't one of your strengths and can't tell you where you are at or where you have been, you are in trouble.
Ask yourself the following questions. Are your accounting and financial records in very good condition? Do you know where your cash is invested? Do you have too much invested in the wrong assets? Do you owe too much debt? What is your rate of return on your capital investment? Would you be better off selling and liquidating the business and investing your money somewhere else? What about the time it takes to run your own business? Do you have enough time and energy to fully devote the necessary time it will take to be profitable and manage your investment wisely? Do you really know enough about the business to manage it wisely? Do you have the right people in place to help you reach your goals?
You have to manage your cash. You can't manage your business from how much cash you have in the bank or how much sales you can produce. There are dealers who have very little cash because they are growing and have reinvested all of their excess cash and profits back into the business, trying to grow sales as rapidly as possible. You can have the greatest increase in sales and gross profits and be out of business in a very short time because you have run out of cash. Why does this happen? It takes an enormous amount of cash to fund dealership operations successfully, and most dealers are undercapitalized or have not arranged for adequate lines of credit to fund the growth they want to achieve.
You have to manage your inventories and make those tough decisions when those units are overage and are using up all of your cash and lines of credit. Does it make sense to dump them and invest in fresh units that are hopefully worth the money you paid for them? Sometimes it does. Keeping overage units around can actually decrease your potential sales volume and grosses and are a poor use of cash. Remember, this is normally one of your largest assets and where you have some equity.
You need to review your liabilities. Are you able to pay your bills on time? Are you and your office manager always scrambling for cash to pay lien payoffs, pay your monthly parts bills and other expenses and still have enough left to make those payroll checks clear this week? Can you pay off your floor plan line of credit according to the loan terms? If you and your personnel are spending most of your time looking for cash and not selling and managing the business, you will not succeed and will fail to reach your goals.
Look for equity in personal and other assets, go to the bank and get a new or increased line of credit or look for an investor/partner to help fund and cash shortage so you can get back to the real business of selling and servicing vehicles and making real money. Do not try to grow too quickly. Be consistent and focused instead.
Build your personnel at the same time you are building your sales volume. Train your people how to do things the right way, the first time. If you don't know how something should be done, find the answer from someone who does. Don't keep spinning your wheels in the mud.
Talk to your accountants. Pretty soon your accountants will be visiting you to complete your annual federal tax return. Talk to them and find out what they think your financial strengths and weaknesses are. They are probably very familiar with your business and know your financial history. Discuss a plan to increase your net worth and cash flow and minimize the cash shortages you are incurring. Sometimes you can get further ahead with steady growth rather than the sales surges you may be fighting to obtain.
Take a look around. Are your financial records in order? Are they only in order at year end after your accountants have completed their work for the tax returns? Your accountants can tell you because they may be cleaning up the same accounting problems year after year. Poor accounting software, inexperienced or poorly trained dealership staff and/or lack of time to get the job done correctly can cause poor accounting records. If so, you should strive to achieve accurate and timely financial records every day and each month-end. This will allow you, your accountant and other advisors to help you achieve your goals in the time you have allotted for them. Don't waste any more time. Find out where you are today, make the necessary changes, get additional help and training and don't stop until you get there!