Pub. 7 2017 Issue 3

20 AUTOMOBILE DEALER NEWS ILLINOIS www.illinoisdealers.com DRIVE DOWN ENERGY COSTS Get cash incentives for energy-efficient upgrades. Lighting accounts for as much as 55% of energy costs at car dealerships. On the bright side, that means you can enjoy significant savings by making simple lighting improvements. Even better, cash incentives from Ameren Illinois can reduce the costs of making interior and exterior lighting upgrades that will help your dealership boost its bottom line each and every year. Get started today — Visit AmerenIllinois Savings.com/Auto or call 1.866.800.0747 the general journal. Reconcile the floor plan bank statement with the general ledger every month. • Key accounts should be processed, reviewed and reconciled promptly. Intercompany or related party transactions also need to be reconciled promptly. Just knowing someone will be looking at the books might be enough to prevent a problem. If journal entries are inconsistent or are adjusted frequently, however, that is a red flag indicating there is a potential problem. • Keep an eye on reserve accounts. What are the accounts for? How do they fit into the monthly reporting package? Look for anything that looks unusual, and then ask questions. • Computers, and the software installed on them, should be updated regularly. • Have someone review electronic transfers on a regular basis. Wire transfers don’t leave a paper trail, which makes them an easy target for fraud. Make sure someone can verify payments with some form of documentation. This can be done in several ways: it is possible to set up a call-back procedure so that when one person authorizes an ACH transaction, someone else in a different department can verify that the ACH has been authorized correctly; alternatively, individual department heads can review and approve department payrolls and someone else can then review each department’s payrolls to make sure the department head looked at them and that the numbers look reasonable; finally, the dealership can conduct an independent review to determine whether wages look reasonable based on each employee’s year-to-date wages in the payroll register. It’s a good idea to have bank statements sent to the dealer’s home instead of the business so the dealer can review an unaltered bank statement. • Schedule and conduct inventory counts periodically. The person who does the inventory should not have a list of the inventory or be able to reconcile back to the accounting records. For example, when taking inventory of new and used vehicles, assign the work to someone who is not in either department, and do the inventory at any time during the month. • Have someone should look at the fronts and backs of cancelled checks, and tell employees that this is being done. • Periodically make sure the controls are working, but don’t announce the fact that you plan to check. • Think about hiring someone to perform analytics on disbursement files and vendor files. Fraud is expensive for dealerships, and the chances of getting money back are relatively small. As a result, it might make sense for management tomake room in the budget for an external audit and to get advice on implementing good internal controls. Preventing fraud is much better for any business than trying to recover from it. Nomatter who you are talking about, employees are much less likely to steal if they think they are probably going to get caught. Set the right kind of example and make sure there is plenty of sunlight in the way your dealership does business and you are much less likely to discover that your dealership has been the victim of fraud.  n Internal Control — continued from page 19