Pub. 3 2013 Issue 2

18 AUTOMOBILE DEALER NEWS ILLINOIS www.illinoisdealers.com M ost dealers count parts and accessories inventory at year end or hire a third party to do the painstaking work. And almost all notice a variance between what’s on the shelves and in their perpetual inventory system or the general ledger. A relatively small difference shouldn’t give rise to pan- ic. But a variance that exceeds 3% to 5% is a cause for con- cern. Here are some ideas for minimizing discrepancies. Are parts a priority? Don’t let parts inventory take a backseat to vehicle stock. Unlike vehicles, which are typically financed with a f loor plan, parts are almost always owned by the deal- ership. And they’re easy to lose, steal and resell online. A third party count may not only be more objective – especially in case of fraud – but it can also be faster. If your parts bins contained cash – rather than hubcaps and belts – would you guard it more carefully? Although it may not be realistic to manage parts exactly like you secure cash, review how you protect your parts inventory and look for leaks. Should you outsource physical counting? Parts employees hate the tedium of counting inventory at year end. Plus, unknowingly using a dishonest parts clerk to count inventory is like asking a fox to count the chickens. A third party count may not only be more objective – especially in case of fraud – but it can also be faster. CPAs conduct dozens of physical counts each year and know the most efficient approach. Moreover, outsider experts wit- ness the industry’s best (and worst) parts inventory prac- tices. So your CPA may be able to offer helpful tips when the job is done. How often should you count? Consider reconciling the perpetual physical inventory system (also known as a tracking “pad”) to the general Counting Inventory Ask the right questions to get the right results BY KEITH A. LAUDENBERGER, CPA