TO DEALER ACCOUNTING &KEY PERFORMANCE INDICATORS

YOUR GUIDE

DAKPI V2/12

SEWELLS GROUP GUIDE TO DEALER ACCOUNTING & KEY PERFORMANCE INDICATORS

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CONTENTS

The primary purpose of the guide is to serve as a reference source for best practice and principles that should be applied to record motor dealer transactions and analyse and interpret dealer financial performance.

It is aimed at filling a knowledge and skills gap.

A holistic approach has been applied in developing and structuring the guide so that users can access know-how and obtain an understanding of a number of related accounting and financial management responsibilities which have been embedded in VirtualBook®.

Dealer accounting, which includes:•Purpose,stakeholders,managingmeetings,internalcontrols•Managementreportsfordealers•Accountingprincipals•DealershipChartofAccounts•Accountingfornew,used,service,parts,F&I,driveway,administration,keyexpensestypes,balancesheet

Key Performance Indicators, which includes:•Purpose,stakeholders,managingmeetings,internalcontrols•Interpreting,DuPontCascade,SewellsMRA,classesofratiosi.e.solvency,liquidity,profitability

•Guidelinesforinterpretingtrends,presentingdataandgraphs•Dealershipanalysisandinterpretation•Analysisandinterpretationfornew,used,service,parts,productivity

The guide is divided into two sections and covers the following topics:

PURPOSE OF THIS GUIDEONE

PURPOSE OF THIS GUIDE

TARGET AUDIENCE

ACCOUNTING GUIDE

KEY PERFORMANCE INDICATORS

ORDERING DETAILS

SUMMARY OF CONTENT

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P 4

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Virtualbook®isaneasytousebook-likeelectronicformat that is installed on a computer. Once registered online VirtualBook® can be updated.

SEWELLS GROUP GUIDE TO DEALER ACCOUNTING & KEY PERFORMANCE INDICATORS

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TARGET AUDIENCETWO

The content of the guide is specialist in nature as it focuses exclusively on accounting for dealer business transactions and the analysis and interpretation of dealership business performance.

Thetargetaudiencewillbeemployeesofdealershipsormanufacturerswhowishtoquestionorcheckorverifytheaccountingfororanalysisandinterpretationofanaspectofdealeroperations.

Sewellsacknowledgethepossibilitythatabetteraccountingpracticeorkeyperformanceinterpretationmayexist.Inviewofthis,theguide also provides an email link - accountingkpiguide@sewellsgroup.com - that allows for correspondence on the content to be exchangedandforsuggestionsforfuturecontentupdates.

The valuation report in section 4.1.1 below illustrated this section.

ACCOUNTING GUIDETHREE

Aspects of two of the main features of the accounting section are illustrated.

Management report for dealershipsThis section covers all departments in the dealership and provides a listing of the minimum number of reports that should be availableforthedealerprincipalandeachdepartmentmanagertomanagetheirareasofresponsibility.

Agenericexampleofeachreportisprovided,itspurposeanduseareexplainedandthefrequencyofreviewbytheuserisalso indicated. A link is provided which permits the user to navigatedirectlytothereport.

SEWELLS GROUP GUIDE TO DEALER ACCOUNTING & KEY PERFORMANCE INDICATORS

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ACCOUNTING GUIDE CONT.THREEDealershipaccounting fornew,used,service,parts,F&I,driveway,administration,keyexpense types,balancesheet, sharecapital.Alleffortshavebeenmadetoincludethegenericcoretransactions,fromthealphatotheomegaofbusinessactivityof each department.

Oneofthebigchallengesfacingtraineeaccountantsinthetwentyfirstcenturyisthattheyonlygetexperienceworkingwithsophisticateddealermanagementsystemswhereasingletransactioncaninitiateaseriesoflinkedtransactionsandsightislostoftheresultingdebitsandcreditsunderlyingtheinitiatingtransaction.Hencetheapproachtoshowthedebitsandcreditsina series of journals matched with the postings to the general ledger.

Sewellswillbethefirsttoacknowledgethataccountingpracticesandpolicieswillvaryacrosstheworldandevenwithina singlecountry.The illustrationsandpractices reflected in theguidearebasedonexperience fromanumberofdealeraccountants,financialmanagersandfinancialdirectorsandservetoillustratethekeyprincipalinvolved.

Eachcoretransactionisillustratedwithasetofjournalsandclassic“T”accountstoillustratethedoubleentryaccountingand posting in the general ledger.

ACCOUNTING GUIDE CONT.THREE

SEWELLS GROUP GUIDE TO DEALER ACCOUNTING & KEY PERFORMANCE INDICATORS

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KEY PERFORMANCE INDICATORSFOUR

Analysis and interpretationTheSewellsapproachtodiagnosingdealerperformancehasitsoriginsintheDuPontCascade,whichallowsfortheperformanceofabusinesstobesplitbetweenoperationalefficiency,themeasurementofprofitabilityandassetutilisation,theextenttowhichoperational assets are used to generate sales. These two performance measures combined give the return on operational assets.

TheguidefocusesontheDuPontCascadeanalysisbutincludesareviewandexplanationofallclassesofratiostoensurethataholistic appraisal of the business can be undertaken.

The purpose and interpretation of each ratio is provided. The ratio formula is provided as is a practical illustration which in some instances is in the form of a popup.

Presenting financial resultsThere are some best practice guidelines for arranging and trending data to get a meaningful interpretation. A section has been added which illustrates these guidelines.

ORDERING DETAILSFIVEOrdering DetailsThe guide is available in two formats: ACDwhichweshiptoyouoradownloadableversionfromtheinternet.

Toorderacopy,pleasecontactyourlocalSewellsGroupoffice.Details can be found at www.sewellsgroup.com

SEWELLS GROUP GUIDE TO DEALER ACCOUNTING & KEY PERFORMANCE INDICATORS

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SUMMARY OF CONTENTSIX

ACCOUNTING GUIDE CONTENTS

•Introduction

•Purpose

•Qualityofdealeraccounting

•Acommunicationtool

•Howtomanagemeetings

•Internalcontrols

•Establishinginternalcontrols

•Recruiting

•Jobdescriptions

•Authoritylevels

•Separationofduties

•Pre–authorizationprocesses

•Managementreportsfordealerships

•Dealerprincipalreports

•Newvehiclemanagerreports

•Usedvehiclemanagerreports

•Servicemanagerreports

•Partsmanagerreports

•F&Imanagerreports

•Financialmanagerreports

•Stockcontrollerreports

•Debtorclerkreports

•CreditorclerkreportsAccountingbestpractices

•Accountingprincipals

DEALERSHIP CHART OF ACCOUNTS

•Activitybasedaccounting

•Statisticalinformationanditsuse

•Typicalincomestatement

•Keyproductivityinputdata

•Accountingfornewvehicles

•Accountingforusedvehicles

•Accountingforservice

•Accountingforparts

•AccountingforF&I

•Accountingfordriveway

•Accountingforadmin

•Accountingforexpensetypes

•Classificationofexpenses

•Payroll

•Interestandfinancecosts

•Rent

•BalanceSheetaccounting

•Basicaccountingequation

•Sharecapital

•Fixedassets

KPI GUIDE CONTENTS

•Interpretingfinancialperformance

•DuPontcascade

•Sewells©MRAmodel

•Classesofratios

•Risk

•Profitability

•Growth

•Interpretingtrends

•Holisticapproach

•Datapresentationbestpractice

•Dealershipanalysis

•ROAA%

•Gearing

•DebtEquity

•Genericsetofratiosappliedtothedealershipand

all departments

•Unitssoldpersalesperson

•Firstgross

•AccessoryGross

•Totalgrossprofit%sales

•Variableexpenses%totalgrossprofit

•Semivariableexpenses%totalgrossprofit

•Fixedexpenses%totalgrossprofit

•Profitbeforetax%sales

•Totalexpenses%totalgross

•Inventorydays

•Debtordays

•Inventoryaginganalysis

•Returnsongrossassets

•Productivity(gross/heads)

•Unitssold

•Unitsserviced

•Workbayutilisation

•Hourworked,clocked,available

•Hourperrepairorder

•Productivity/efficiency/effectiveness

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Disclaimer: The information in this brochure is correct at the time of production. Sewells reserves the right to make changes at its sole discretion.

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