THE CLOSE

Much has been written over the years about the close. In my day when we there were no computers the target date to close the month’s business was the 10^th workday of the month. With the advent of computers the target date became the 5^th workday. Today some gurus preach closing the month on the 3^rd workday of the month. I have no idea who decided the 3^rd workday should be the target. I prefer to compromise and target the morning of the 4^th workday.

I once closed in two days and made the mistake of giving the statement to the dealer. The mistake was - guess who was knocking on the door the next month looking for the statement on the 2^nd workday. There is no reason to go into overdrive to meet a 3^rd workday self imposed deadline. Why put pressure on the staff and yourself when in reality the morning of the 4^th workday is acceptable.

There are two reasons to close the month’s business as quickly as possible.

1. The faster the books are closed the faster one can concentrate on current month’s business.
2. Get the people paid. Commission and bonus employees work hard throughout the month and want to get paid.

In reality there are three types of closes in a dealership. All three are integrated and each is a function of the other.

The Daily Close

The first close is the daily close. It is imperative that all business transacted today is booked today. The hard and fast rule is - all business that hits the office today gets booked today. No excuses, zero, nada. That means car deals, payable invoices, checks received, factory invoices/credits, vehicle invoices, used vehicle purchases, d-trades, etc. all get booked. No exceptions. There is absolutely no reason not to close daily with a properly trained and properly staffed office.

The Monthly Close

The second close is the monthly close. The monthly close is just a wrap-up of the last days’ business and should be completed by the 3^rd or 4^th workday of the month. Nothing more, nothing less.

The Yearly Close

The yearly close is a monthly close with a few additional adjusting entries, i.e. an accrual for annual bonuses, the used car write-down, and the LIFO entry, would be examples of year end entries.

1^st Workday

Your job on the 1^st workday is to make the rounds of the departments and remind the managers that prior month’s business must be in the office by the close of business today. There is not a whole lot a controller can do until the prior month’s business is booked; it is the controller’s job to prod the managers and gather information. Examples would be:

1. Remind the parts or service manager that the gas and oil inventory must be in the office by noon.
2. Remind the body shop manager that the paint and material inventory must be in the office by noon.
3. Pressure the parts manager for vendor invoices to be in the office by noon. If the manager hasn’t recorded the invoices take the invoices, book them and return the invoices to the parts manager.
4. Call the financial institution for floor plan charges if available. Don’t wait for the statement.
5. Give the new and used sales managers a detailed advertising expense listing for the month to see if anything is missing.
6. Get with the service manager and close completed internals. Close repair orders that are complete but are waiting for customer pick-up. Set the repair orders up as a receivable.
7. Ditto with the body shop manager. Close repair orders that are complete but waiting for customer pick-up.
8. Get with the parts manager and close or void special orders as appropriate.
9. Remind the sales department managers and the F & I managers their sales logs must be in the office by the end of the day.
10. Have a five minute staff meeting. Ask where they are at?
11. Print a financial statement and trial balance. Update KISSIT. What is missing? What’s out of line?

2^nd Workday

1. Again make the rounds to all departments to tie up loose ends. Is all prior month’s business in the office?
2. Ask sales managers for any contest bonuses, spiffs, etc.
3. Reconcile factory parts statement if available.
4. Post standard entries.
5. Print a detailed expense ledger. What is missing?
6. Print a trial balance. What is missing?
7. Review schedules.
8. Have a five minute staff meeting. Ask where they are at?
9. Print a financial statement and trial balance. Update KISSIT. What is missing? What’s out of line?

3^rd Workday

1. Print a detailed expense ledger. What is missing?
2. Print a trial balance. What is missing?
3. Review schedules.
4. Accrue payroll.
5. Accrue commissions and non-managerial bonuses.
6. Accrue managers’ bonuses.
7. Post standard entries.
8. Have a five minute staff meeting. Ask where they are at?
9. Print a financial statement and trial balance. Update KISSIT. What is missing? What’s out of line?

4^th Workday

1. Have a five minute staff meeting. Ask are they done?
2. Schedules purified?
3. Print a financial statement and trial balance. Update KISSIT. What is missing? What’s out of line?

The close looks simple enough and it is. EXCEPT. Your dealer must be on board with established month end procedures. If deals are not in the office at the designated time and the dealer doesn’t enforce the procedure, then all bets are off and the month will not be closed on a timely basis.