The following typical factors and complexities make Automobile Dealership a challenging and highly complex business activity:

  1. Huge investment by way of equity and borrowed funds
  2. Excessive manpower requirement
  3. Stiff competition not only from own brands  but also from other brands
  4. Inefficiency in Working capital management
  5. Susceptibility to fraud, malpractices and falsification of accounts & documents
  6. Lack of leadership quality among departmental heads
  7. Inadequacy of quality training
  8. Abrupt change in key persons without proper replacement

2. Situations which necessitates health checkups and professional management:

  1. Lack of adequate Internal Control and proper process flow
  2. Excessive stock holding
  3. Diversion of working capital to long term investments
  4. Inefficiency of Top Management
  5. Weak HR department
  6. Lack of proper MIS & Budgetary Control
  7. Excessive salary to unproductive staff
  8. Rampant malpractices, falsification of accounts by sales team in connivance with departmental heads
  9. Non-submission of timely returns for claiming incentives, exchange bonus etc
  10. Excessive finance cost
  11. Inability to generate monthly reports

Many of the factors mentioned above resulted in closure of several viable and highly potential automobile dealers especially in Kerala

A proper Health check-up, professionalism, Internal Control & MIS can make Automobile Dealership a challenging and rewarding experience.

3. The crisis faced by Automobile dealers

a. Increased pressure from OEM to off-take the load from their heads

b.Unhealthy business practice among business competitors

c. Compulsion to provide excessive freebies to secure sales

d. Achieving the sales target of non-performing products

e. Piling up of slow moving parts, accessories & products due to compulsive dumping by OEM

f. Increased pressure to achieve sales targets to maintain premium dealership

g. Increased Labour Turnover compared to other business segments

4. Need for proper process flow and Internal Control

Unless proper and adequate internal control system is in place internal frauds can often occur in automobile dealerships and the financial impact of such frauds could be disastrous.

5. Multiplicity of Profit Centers

A dealership business consists of multiple unconnected business activities within one roof such as:

  • Sale of New cars
  • Sale of used cars
  • Services
  • Parts &  Accessories
  • Driving School

Each of this business is being run as independent profit centre and this makes things extremely complicated to monitor and control as each line of business has its fraud risk factors.

6. Statutory Compliances

Harassment from both Direct & Indirect Tax departments and raising of unreasonable demands make the lives of dealers miserable. The only solution therefore is to have foolproof accounts with convincing documentary evidence. Equally important is the need for complying with Labour Laws.

To know more about our business health check up services for automobile dealerships, please contact 9447123625 or jose@jaksllp.com.