Parts inventory shrinkage is a silent profit killer for many dealerships. It occurs when the actual inventory on hand is less than what is recorded in the dealership management system (DMS). Whether due to theft, mismanagement, or accounting errors, uncontrolled shrinkage can lead to lost revenue and operational inefficiencies. What Causes Parts Inventory Shrinkage? Theft & Pilferage: Employees or outside…
In the fast-paced world of automotive dealerships, staying on top of inventory and financial accuracy is crucial. One of the most critical tasks is reconciling parts inventory to the general ledger (GL). But the question many dealerships face is: Can parts-to-GL reconciliation be done daily, entry by entry? And why don’t monthly reconciliations cut it? Let’s dive into the importance…
Parts to General Ledger (GL) variances are a common frustration for dealerships, leading to financial discrepancies that can impact profitability and reporting accuracy. Understanding the root causes of these variances is the first step toward eliminating them and maintaining a clean reconciliation process. What Causes Parts to GL Variances? 1. Parts Received but Not InvoicedWhen parts are received into inventory…
Inventory variance is a persistent challenge for dealership parts departments, often leading to financial losses and operational inefficiencies. While minor discrepancies may seem insignificant, they can accumulate over time, affecting profitability, customer service, and even compliance. Understanding the hidden costs of inventory variance is crucial for dealership managers and accounting teams. 1. Financial Losses Due to Shrinkage One of the…
To reconcile your parts inventory to your parts general ledger you’ll need to take your ending inventory balance and compare that to your GL closing balance for the same date. You will also need to account for all your reconciling items. Using the following calculation will give you your variance: Variance = Ending Inventory – (GL Closing Balance + Reconciling…