Cash Management for Auto Dealerships
Cash Management for Auto Dealerships
Introduction
Dr. Hershauer stated in Lecture 11, “Cash is king”, which is only three small words that emphasize significant meaning for managers to operate efficiently. This statement depicts one of the top priorities of why businesses, not only automotive dealerships, maintain success. New business entrants may believe the idea that you are out of business when you show an operating loss, but Hershauer (2011) proves that you are out of business when you are out of the most liquid source, cash. To directly relate cash management to the automobile industry, one has to take into account the several different departments that make up one dealership. The different components of a dealership are split up into the New Vehicle Department, Used Vehicle Department, Parts, Service, Business Office, and the Finance and Insurance Department. Vaughn (2005) implies that “there are six businesses under one roof for a reason. In a time where, say, a particular manufacturer 's new product may be losing some market appeal, the dealer has the used-car business to counter-balance the drop in new-car sales”. Cash management from all of these departments involves simultaneously maximizing sales, controlling expenses, and maintaining payment from customers.
Define Criteria for the Balance Sheet
In the article, “Understanding Effective Cash Management”, Reider (2005) explains “an early step in successful cash management is for the organization to clearly define its desired criteria for results and success as related to such factors as reasons for existence, basic business principles, mental models, belief systems, performance drivers, and so on” (p. 7). Reider (2005) believes the structure of defining desired criteria for results and success is the first essential tool in cash management. The criterion includes sections categorized by organization wide, sales function, manufacturing, personnel, purchasing, and accounting. These basics are a
Introduction
Dr. Hershauer stated in Lecture 11, “Cash is king”, which is only three small words that emphasize significant meaning for managers to operate efficiently. This statement depicts one of the top priorities of why businesses, not only automotive dealerships, maintain success. New business entrants may believe the idea that you are out of business when you show an operating loss, but Hershauer (2011) proves that you are out of business when you are out of the most liquid source, cash. To directly relate cash management to the automobile industry, one has to take into account the several different departments that make up one dealership. The different components of a dealership are split up into the New Vehicle Department, Used Vehicle Department, Parts, Service, Business Office, and the Finance and Insurance Department. Vaughn (2005) implies that “there are six businesses under one roof for a reason. In a time where, say, a particular manufacturer 's new product may be losing some market appeal, the dealer has the used-car business to counter-balance the drop in new-car sales”. Cash management from all of these departments involves simultaneously maximizing sales, controlling expenses, and maintaining payment from customers.
Define Criteria for the Balance Sheet
In the article, “Understanding Effective Cash Management”, Reider (2005) explains “an early step in successful cash management is for the organization to clearly define its desired criteria for results and success as related to such factors as reasons for existence, basic business principles, mental models, belief systems, performance drivers, and so on” (p. 7). Reider (2005) believes the structure of defining desired criteria for results and success is the first essential tool in cash management. The criterion includes sections categorized by organization wide, sales function, manufacturing, personnel, purchasing, and accounting. These basics are a
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