By Russell Baqir, SVP – Business Development, Northpoint Commercial Finance, an MRAA Strategic Partner
In today’s dealership environment, dealership cash flow and profitability is more critical than ever. Your annual financial statements tell the story of your business’s health.
In our floorplan or lending world, we obtain financials annually that originate from several sources. They range from “Internally Prepared” to “Accountant Prepared” to “Accountant Reviewed” or “Accountant Audited.” Sometimes a review of these docs throw up a red flag and cause concern for our clients. For example, we may find balance sheets that don’t balance. We may detect missing assets or corresponding liabilities. Sometimes, profit and loss (P&L) statements may be missing key elements like depreciation or interest expense.
The Importance of Accurate Financials
In our conversations with customers, we understand some dealers produce financials just to satisfy the lender or bank requirements. They really don’t understand the genuine benefits of having financials to help guide smart business decisions.
Yes, we know working on the books is sometimes akin to visiting the dentist to get a tooth pulled. We get it! We also understand it takes a lot of time and work to establish a budget and/or forecast, but we can’t recommend it enough. Your ability to carefully monitor and measure against it is really “the secret sauce” for sustained business success.
Here are a few important considerations:
- Owners and key managers should have a basic understanding of the impact of ALL costs and expenses on their business. FACT: Even though you may be profitable, you can still run out of cash.
- What’s your process for when you review statements that you’ve received for the tax year? We recommend sitting with your key leadership team to jointly analyze and review what has happened to your assets, debt, equity or cash flow. Get everybody up to speed and on the same page.
- We recommend reviewing your financials on a monthly, quarterly and annual basis and aligning them to the budget you’ve established. This will allow you to quickly discern if you’re missing the boat or in control at the helm. And, having the key leadership team on the same page creates a higher level of accountability … and significantly better chance for maximizing profitability.
Cash Flow Management and Leadership Accountability
Make sure your GM or sales manager possesses and knows how to apply basic accounting skills including how to effectively price out the sale of a boat. They must understand the bare minimums that must be charged for service by accounting for ALL the impacts of expenses, like cost of labor, rent/mortgage, interest, etc.
When requesting assistance from a partner or lender, be prepared to communicate and demonstrate the minimum cash needs on a daily, weekly, or monthly basis for the business.
Align corresponding periods of your balance sheet with P&L statements so you know if cash in the bank is decreasing; if accounts receivable or inventory has increased; or if corresponding debt is trending up.
Turning Financial Insights into Smart Business Moves
We’d like to offer up this analogy: your financials are your business story for the year. Your business successes and/or failures should be reflected through the changes in your numbers.
Having a finger on the pulse of your business allows you to pivot as needed. Regular reviews are essential for maintaining dealership cash flow profitability and may prompt smart questions, like:
- “Are retail deals taking longer to fund?”
- “How much did the inventory cost go up”
- “How much do you have in inventory?”
Having the facts allows you to intelligently consider available options. For example, how much could you save and earn by allowing Elite Recreational Finance handle your F&I?
Finance & Accounting Educational Resources
In closing, your dealership needs to find a reliable finance business that you can “count on,” and support your organization. The Northpoint team has provided a few links to resources that can boost your accounting IQ as needed, and we’re always an email or phone call away at (678) 359-6336.
The following is a short list of established marine industry service providers that assist dealers and OEMs in accounting/financial management. Northpoint does not provide recommendations but provides these references and resources for your consideration.
- Chris Capone/Dealer Consultants: www.caponeandassociates.biz; 910-415-7715
- Melissa Foster, CPA | Principal/Consultant: mfoster@whitecapstrategy.com; 865-803-5120
- MRAA Spotlight (library): https://mraa.com/cashflowplanning/
About the Author
Senior VP – Business Development at Northpoint Commercial Finance, Russell Baqir is a true industry veteran having spent a significant portion of his career in Marine inventory finance, most recently as Marine Division President at Textron Financial.
When tasked with launching Northpoint’s Marine program in 2012, Baqir sought to create a highly customized and personal approach that the mega banks simply could not deliver. Drawing on his substantial industry relationships, he quickly established Northpoint as a market leader with genuine support from some of the top dealers and OEMs in North America.
Baqir proudly represents Northpoint as an active member of the National Marine Manufacturers Association and Marine Retailers Association of the Americas. When he’s not helping businesses stay cash-strong, he enjoys exploring the outdoors and staying connected to the boating lifestyle that has defined much of his professional journey.
