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Financial Controls Revisited

Financial Controls Revisited

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Analyzing financial statements can be a complex and difficult process. Behind the numbers is a set of controls and systems that, if working correctly, feed appropriately into the financial statement and allow for efficient oversight. When these controls break down, review takes more time and mistakes may be a cost to dealers. Having a good understanding of the numbers behind the financial statement and providing for the proper internal controls within the dealership allows the dealer to focus on the key automotive retailing issues.

In general, continually checking inventories of all assets and maintaining oversight of all financial functions by management is a good foundation to proper controls. The following is a summarized checklist of controls that can help dealers safeguard against future problems:

  • Someone other than the person responsible for the collections, receipting or depositing of cash, should prepare the bank reconciliation. The dealer or management should review the bank reconciliation.
  • A computer generated report of daily cash receipts should be used in reconciliation. Management should periodically review cash receipts. After hours receipts should be written in a manual book so that no one can produce a computer generated receipt.
  • If there are dual signatures required with the dealer, the dealer should be the last signature reviewing the supporting documents for each check. Dual authorized signatures should be required on checks that exceed a predetermined amount.
  • The person who opens the mail should not receipt or receive cash/checks. The person reconciling the over the counter receipts should be independent of cashiering. Management each month should review account receivable schedules.
  • Purchase orders should be used for every purchase and prenumbered. Management must authorize all purchase orders. Monthly vendor statements must be reconciled to the accounts payable schedule. Checks written to accounts payable vendors must be matched to the open invoices prior to processing.
Louis Young Louis Young
T (732) 572 3900
lyoung@withum.com

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To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

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