Wayne Reaves Advantage

Auditing 

Year-end is the best time to consider pre-auditing your business. Start with these basic questions to ask as the Manager or Owner of the business:

• Do my Transaction Reports match my Bank Deposits?

• Is my bank account(s) ready to be reconciled?

• Have I authorized all non-payment transactions such as: voids, credits, other adjustments.

• Can I account for the entire Inventory? The IRS requires a complete physical inventory including: Master Inv Report reconciled to the As of a Date Report, Units for Sale, Units on Hold (Repairs, Demos, Repo Holds)

• Are ALL Titles in hand or accounted for in the ETR system?

• Valuation Audit - recheck all valuations using NADA values.

• Does the DMS have the most accurate valuation?

• Are any valuations suspiciously high or low? If so, re-state the value and report these to CPA.

• Have any units devalued significantly? If so, report these to your CPA with the original value and current value.

• Has the Car Lot paid the RFC for all Repos?

• Are there any other sales that seem unusual?

IRS Compliance

To be fully compliant with the IRS, there are certain criteria that must be met. Some information to use/reference:

• From 8300 Reports and Consumer Notifications

• 1099-C and 1099-Misc

• Payroll ready for W2 forms? Fixed Cut-off date?

• Do we need updated W4 forms? (Yes, every year)

• I-9 Forms on file for every employee?

Related FAQ

• Do I have outstanding Receivables that need to be settled?

• Do I have outstanding Payables to be settled?

• Have I dealt with, or do I have a plan to deal with Property Taxes?

• Are there any questions I have for my CPA?

• RFC: Have I maintained the proper relationship distance with the car lot?

• Is it time to renew my State License?

• Are my advertising and digital marketing fulfilling my needs?

• Do I have an Operations Plan for next year? For example:

• Marketing Planning

• Sales Goals

• Financial Planning

• Staff Analysis

• Average unit cost to sell (AUCS) (see discussion below)

Saving Deals: Avoid Cross-Period Reporting Issues

If you enter a deal in late December 2024, and save it as a Pending Sale (or Lease), then re-open this deal after January 1, 2025, and save it as a Completed Deal, you will have a cross-period reporting issue.

The Sale will have a 2024 date, and the income from the down payment (or cash payment or lien holder check) will have a 2025 date. Depending on the Sales Tax method, this deal may be reported as 2024 (Accrual Method) or 2025 (Cash Method). For Income Tax purposes, this will be a 2024 sale. However, your receipts (the actual income) will be in 2025. The Account Receivable will have an opening date and opening balance show up in 2024, even though, for all practical purposes, this is a 2025 account.

To avoid this, on the last day of the year, re-open ALL Pending Sales, change the Deal, or Sale, Date to 1/1/2025. This will prevent you from having to re-print and revise the reports you may have already turned over to your accountant.

Selling Accounts to In-house RFC
If your CPA advises that you sell accounts to In-house RFC for 2024, then make sure this is done before running these reports. Otherwise, both the Car Lot and Finance Company Accounts Receivable reports will change. This also greatly affects both your Income and Sales Tax Reporting.The Cash Method states that all remaining Sales Tax is due and payable upon sale of the account. This income, for both Income and Sales Tax purposes, is reported as having been collected on the date of sale of the account to the RFC.

Regardless of the amount the Car Lot collected for the account, even if the entire Principal was not collected from the RFC, all remaining Sales Taxes are now payable. The Taxable Principal amount shown on the Sales Tax report will be the remaining taxes divided by the tax percentage.

CPA Help

If your CPA has any questions for us about your reporting or the Wayne Reaves program itself, have them call us before year-end. They will need to identify the dealership they are calling about. 

Note: We do require the dealer to send an email to support@waynereaves.com advising us of the CPA’s name and firm. This will confirm that we have your authorization to talk to them about your business.

Forms

Go to IRS.gov to get updated W-4 and I-9 forms. If your state Department of Revenue requires a form like the W-4, they can usually be found on your state DOR website. Ask your CPA if this is the year to consider a Related Finance Company (RFC). If it is, you may have additional work to do to set up the corporation, bank accounts, business licensing, and other setup work.

Average Unit Cost to Sell (AUCS)

Take your total administrative costs for the year and divide that amount by the number of cars sold. This number is the amount of money each unit costs you over and above related costs. It is good to keep this AUCS number in mind as you go into next year.

Related Costs 

Related costs are those things that can be attributed to or tied to a specific unit, such as:

• Initial purchase or investment.

• Floor plan costs.

• Repairs, Maintenance, & Fuel.

• Commission.

• Tax & Title Fees.

• Casualty/ Charge off losses.

Administrative Costs 

Administrative costs are general expenses that affect every car, such as:

• Rent/Mortgage.

• Business, Property, and Income taxes Utilities (Lights, Internet, Phones).

• Business Office Equipment (Computers, printers, fax machines, supplies). Software/Website costs.

• Office and general lot salaries.

• Advertising.

• Professional / Legal Fees (Association Memberships, CPA, Attorney, etc.).

Your CPA can advise you on whether your Admin Costs are in line with your business model. You must set your pricing on sales to include this AUCS and set your profit targets accordingly.

Cash Flow

This also is an ideal time to evaluate your cash flow position and decide whether to adjust the business needs or practices accordingly.

Web Presence

If you do not have a web presence, please consider it. More than 80% of used-car buyers, even at the sub-prime level, researched their purchase on the internet before committing to a deal.