It starts the same way every time. A little warning. A number that’s just slightly off. Maybe a general feeling that something isn’t quite right. Sort of like when your doctor clears his throat, looks at your chart, and says, “Let’s talk about your cholesterol.” And just like that, you’re nodding solemnly while silently wondering if the bagel you had for breakfast counts as attempted suicide.
That’s the tone I want to strike here. Because much like cholesterol, the real dangers in dealership accounting are quiet. Subtle. Sneaky. They don’t announce themselves with fanfare and flashing warning lights. No, they slip in unnoticed—through sloppy reconciliations, half-hearted oversight, and a general agreement to look the other way until someone from the bank asks a question no one can answer.
The high cost of problematic dealership accounting practices.
I’ve seen some things. The kind of things that don’t just dent the bottom line, but knock it completely off the page. We’re talking hundreds of thousands of dollars gone—vanished, like a magician’s assistant with a corporate card. I’ve watched people slink out the back door with resignation letters so vague they might as well have been haiku. Others just ghosted entirely, as if accountability were optional, like seatbelts in a vintage convertible. And then there are the folks who didn’t get to leave quietly. Some were fitted with ankle jewelry courtesy of the state, while others earned themselves a scenic stay at what I lovingly refer to as the Graybar Hotel.
I’ve seen a sales manager approve a panel van deal to a houseless person, when it was clear the person could not pay the payments or even fully comprehend the process. The only way the deal was unwound was because the bank called the references on the app and one of them said, “OMG, you didn’t sell her a car, did you??”
Once, I was hired to figure out why a dealership was constantly gasping for air—financially speaking. After poking around, I discovered $5 million in outstanding contracts still sitting at banks, collecting dust and late fees like baseball cards no one wanted. The finance manager and I made a pot of coffee, picked up the phones, and performed a miracle we now refer to as “Dialing for Dollars.” It worked—but it never should have come to that.
These aren’t rare horror stories. These are the symptoms of what I call the Silent Killers of dealership accounting. They don’t just mess with your bottom line. They mess with your head. They drain your energy, keep you up at night, and sometimes lead to… well, ankle bracelets and orange jumpsuits.
A clean operation, including clean books, keeps silent killers at bay.
Clean books don’t just look good—they feel good. There’s a peace that settles over a dealership when the numbers match, the deals pencil, and no one is hiding the checkbook. And yes, there are plenty of dealers who get this. Who respect it. Who sleep soundly because they know what’s coming in and going out.
But there are also those who… don’t. Who let things slide until they skid sideways off a cliff. And I don’t say this to shame anyone. I say it because I want to help. Because once the accounting is clean, and operations are running like a freshly-detailed front line, something beautiful happens: peace of mind.
And let’s face it—the car business is stressful enough without adding federal indictments to your calendar.
So, let’s talk about the seven silent killers I’ve seen too many times in the wild. You won’t find them on a balance sheet at first glance, but trust me—they’re there. And the sooner you spot them, the sooner you can stop them.
1. Not Reconciling Bank Accounts
This is the first thing I ask when I work with clients: “Are your bank recs up to date?”
Failing to reconcile a business bank account can lead to several negative outcomes, each with significant repercussions for the financial health and operational integrity of the business. The following are some of the key consequences:
- Inaccurate Financial Statements
- Explanation: Without regular reconciliation, discrepancies between the bank’s records and the business’s accounting records typically leads to inaccurate financial statements.
- Impact: This misrepresentation can mislead stakeholders, investors, and management, affecting decision-making processes and potentially resulting in financial losses.
- Cash Flow Problems
- Explanation: Unreconciled accounts cause misrepresentations of the business’s actual cash position, leading to poor cash flow management.
- Impact: This can result in overdrafts, bounced checks, and an inability to meet financial obligations on time, which could harm the business’s credit rating and relationships with vendors.
- Fraud and Embezzlement
- Explanation: Regular reconciliation identifies any unauthorized transactions or fraudulent activities.
- Impact: Neglecting this task provides opportunities for fraud or embezzlement to go unnoticed, leading to significant financial losses and legal complications.
- Missed Errors
- Explanation: Errors such as bank mistakes, duplicate entries, or accounting inaccuracies are often caught during the reconciliation process.
- Impact: Failing to reconcile allows these errors to persist, compounding over time and making it difficult to correct them later, which affects financial statement accuracy, tax reporting and can actually become very large sums of money to write off.
- Tax Compliance Issues
- Explanation: Accurate and timely reconciliation ensures that all income and expenses are properly recorded and reported.
- Impact: Inaccurate records lead to incorrect tax filings resulting in penalties, interest charges, amended returns and potential audits by tax authorities.
2. Lack of Dual Control
Dual control is sort of like the buddy system, but for money. It’s an internal control that says, “Hey, maybe let’s not trust just one person with the keys to the vault.” Instead, it requires two authorized adults—ideally sober and sane—to approve, process, and carry out important financial transactions.
This isn’t just about trust (though that’s part of it). It’s about not waking up one day to find that someone accidentally—or “accidentally”—wired $87,000 to a fake parts vendor in Belarus. With dual control, one person holds the pen, the other holds the conscience. Ideally.
The main components of implementing dual control include:
- Segregation of Duties
- Explanation: Tasks are divided among multiple employees so that no single individual has control over all aspects of a financial transaction. For example, one employee might initiate a payment, another approves it, and a third disburses the funds.
- Authorization and Approval
- Explanation: Financial transactions, such as issuing checks, processing payroll, or transferring funds, must be reviewed and approved by at least two authorized individuals.
- Example: A payment exceeding a certain threshold might require the signatures of both the GM and the CFO.
- Access Controls
- Explanation: Access to financial systems and sensitive information is restricted and requires multiple layers of authentication and approval to ensure only authorized personnel can make changes.
- Example: Access to the payroll system might require credentials from both the HR manager and the controller.
When dual control is missing, things can unravel fast. Without that built-in system of checks and balances, money moves a little too easily, oversight weakens, and accountability slips through the cracks.
Here’s how the absence of dual control can quietly wreak havoc on a dealership’s financial health and security:
- Increased risk of fraud and embezzlement:
- Explanation: Dual control requires that two individuals approve or execute a transaction, reducing the opportunity for a single person to commit fraud.
- Example: Without dual control, an employee with access to both the company’s bank accounts and accounting system could divert funds for personal use without detection.
- Errors and mistakes going unnoticed
- Explanation: Dual control acts as a check and balance system, where one person’s work is reviewed by another, helping to catch and correct errors.
- Example: An incorrect entry in the financial records might go unnoticed without another person reviewing and verifying the transaction, leading to inaccurate financial statements.
- Lack of accountability
- Explanation: When tasks are performed by a single individual without oversight, accountability is diminished.
- Example: If an employee processes payments without supervision, there is no one to hold them accountable for ensuring accuracy and adherence to policies.
- Compromised financial integrity
- Explanation: Dual control helps maintain the integrity of financial processes by ensuring that no single individual has unchecked authority over transactions.
- Example: In a scenario where only one person handles all aspects of payroll, there is a risk of fictitious employees being added to the payroll for fraudulent purposes.
- Loss of internal controls
- Explanation: Effective internal controls are crucial for safeguarding assets, and dual control is a fundamental component of these controls.
- Example: Without dual control, it becomes easier for unauthorized transactions to be executed, such as unauthorized purchases or payments.
- Difficulty in detecting and investigating fraud
- Explanation: Dual control creates a paper trail that can be used to detect and investigate discrepancies.
- Example: In the absence of dual control, fraudulent activities may not leave a clear audit trail, making it harder to investigate and resolve financial irregularities.
- Weakened operational efficiency
- Explanation: While dual control might appear to slow down processes, it actually ensures that transactions are properly vetted, leading to long-term efficiency and reliability.
- Example: Without dual control, businesses may face frequent disruptions due to the need to rectify errors and investigate discrepancies, ultimately affecting operational efficiency.
3. Improper Expense Allocation
Every now and then, a dealership owner or GM decides that their personal life should be tax-deductible. Suddenly, home renovations, private chefs, or a suspiciously high number of “client lunches” start showing up on the books. Magically, the dealership’s profits shrink, operational costs balloon, and everyone acts surprised when the numbers don’t make sense.
Take, for example, the owner who’s redoing his kitchen. Instead of paying out of pocket like a mere mortal, he tells the controller to tuck those expenses under the dealership’s operating costs. Voila! He turns a major personal expense into a business deduction. It’s a financial illusion worthy of Vegas—right up until the IRS kicks in the door.
Not only is this unethical, it’s tax fraud. It jeopardizes the dealership, the owner, and anyone else who helped cook the books. Because when the feds show up, they don’t care how nice your backsplash looks.
4. Capitalizing Monthly Expenses
Some dealers or GMs try to get clever with the books by disguising monthly expenses as capital expenditures. It’s the financial equivalent of stuffing clutter into a closet before guests arrive—sure, things look better, but only temporarily. This little trick boosts monthly profits on paper by delaying a legitimate expense instead of booking it in the month it belongs.
In the short term, it makes the dealership appear more profitable than it actually is. In the long term, it distorts the true financial picture—like using a Snapchat filter on a balance sheet. Even worse, it can pad the paychecks of managers who earn commissions based on net profit. So, while the dealership’s performance may look stellar, the numbers are quietly lying to everyone involved.
Real life example: A $25,500 invoice shows up for an ad campaign promoting this month’s big sale. Instead of charging it to the advertising expense account—where it actually belongs—the GM casually tells the controller, “Just stick it in Prepaid Advertising.” That account’s an asset, not an expense, which means the cost doesn’t hit the profit and loss statement at all.
Why would he do that? Simple: the GM’s pay plan is based on net profit. By tucking the ad spend away like it’s a rainy-day fund, the store’s profit looks $25,500 better than it actually is. And just like that, the GM’s paycheck gets a nice, undeserved bump—paid for by creative accounting and the dealership’s long-term financial accuracy.
5. Poor Receivable Collection Process
If dealerships had a heartbeat, it would be found in their receivables. This is the money they’re owed—money that keeps the lights on, the paychecks coming, and the coffee machine humming. We’re talking Contracts in Transit, Vehicle Receivables, Manufacturer Incentives, and Warranty Receivables—big-ticket items that often total millions every month. And when that money doesn’t show up on time? Things spiral. Fast.
Why the breakdown? Pick your poison. Sometimes it’s a well-meaning but untrained employee. Sometimes it’s the void between operations and accounting—two departments that speak different dialects of “urgent.” Other times, it’s plain old leadership neglect, where no one’s checking in, following up, or asking the uncomfortable questions. Toss in a national experienced dealership employee shortage and the fact that no one’s bothering to review the receivables each month, and you’ve got yourself a full-blown financial dumpster fire.
Real life example: I once worked with a dealer group whose General Manager treated accountability like a contagious disease—something to be avoided at all costs. When we acquired a new store, sales spiked almost immediately. Great news for the top line, but the finance manager wasn’t remotely prepared for the volume. He was drowning, and no one was throwing him a life preserver.
Within six months, we had a wall full of car deals—literally hanging there—waiting to be funded. These weren’t pending sales. The vehicles were already delivered, happily burning gas, while the contracts sat unfunded by the banks, some over 90 days old. In dealership speak, that’s a ticking time bomb. And it kept ticking.
I raised the alarm with ownership early and often, but for months, nothing changed. Eventually, the inevitable happened: we ran out of cash.
That’s when the GM came to me with a bright idea. He wanted me to create a spreadsheet—one that made it look like we needed a capital injection from the corporate office. Not to fix the problem, mind you, but to disguise it. I declined and offered a more practical solution: “Let’s just collect the outstanding contracts in transit. That’ll solve your cash problem.”
His response? He threw the papers he was holding at my face and shouted, “Well, fuck you then.”
Charming.
As a corporate officer with a legal duty to protect the company (and myself), I knew the clock was ticking on my time there. It wasn’t long before I made my exit.
Eventually, the GM did too—only his came with an escort out of the building.
6. Ghost Payrolling
This one’s straight out of a crime novel—only it happens in plain sight, behind a desk, often with access to the payroll system. It’s called ghost employee fraud, and it’s exactly what it sounds like: someone adds a fake employee to the dealership’s payroll and quietly collects their “wages.” The ghost doesn’t show up, doesn’t sell cars, doesn’t even complain about the coffee. They just get paid.
The fraudster—often a payroll clerk, manager, or in some truly disturbing cases, the GM—sets up fake identities, sometimes complete with bank accounts, Social Security numbers, and the kind of paperwork you’d expect from someone applying for a mortgage.
There are a few common flavors of this scheme:
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Invented identities: Completely fake names created and added to the system, drawing paychecks like real employees.
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The Never-Quite-Gone: Ex-employees who mysteriously stay on the books long after they’ve left—like ghosts with benefits.
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Time sheet tampering: Real employees, fake hours. Someone inflates time worked and quietly pockets the extra pay.
It’s payroll fraud with a twist—and without dual control or strong oversight, it can go undetected for months, sometimes years.
Impact on the organization:
- Financial losses: The primary impact is direct financial loss. The organization pays salaries and benefits to non-existent employees, draining resources.
- Eroded trust: It damages trust within the organization, particularly if the fraud is perpetrated by someone in a trusted position.
- Operational disruption: Uncovering and rectifying ghost payroll schemes are disruptive and costly.
- Reputational damage: If the fraud becomes public, it can damage the organization’s reputation with stakeholders, including investors, customers, and employees.
7. Dubious Wholesaler and Vendor Relationships
Sales and service managers in dealerships often work closely with vehicle wholesalers and vendors—relationships that, when handled properly, can be mutually beneficial and even strengthen the dealership’s operations. But occasionally, the line between professional and personal benefit starts to blur. A manager might be tempted by perks or gratuities—gift cards, cash, “thank you” weekends in Vegas—in exchange for steering business toward certain vendors. Sometimes, this favoritism includes overpaying for products or services, which quietly chips away at the dealership’s bottom line.
What seems like a harmless friendly gesture can ultimately cost the store far more than anyone realizes.
Solution: The best way to keep backroom deals and questionable “thank you gifts” in check is to build a culture that makes that kind of behavior feel awkward at best—and impossible at worst.
One simple but effective approach? Take vendor selection out of back pockets and put it into a formal approval process. A management committee (yes, an actual one that meets) should decide which suppliers and wholesalers make the cut. From there, you create a master list of approved vendors, so everyone knows exactly who they can do business with—no mystery, no loopholes, no golf trips disguised as “meetings.”
Pro tip: Review the approved vendor list quarterly. It’s a good way to ensure your trusted relationships stay trustworthy—and that no one’s slipped in a “friend of a friend” who triple-bills for floor mats.
How Silent Killers impact the company and its stakeholders
- Ownership and investors start to get that haunted look. Misleading financials make things look rosier than they are, and when the truth finally staggers into the daylight, it usually demands blood. Or at least a very expensive cleanup crew.
- Employees don’t do well in unstable environments either—unless your business model involves whispered hallway conversations and sudden disappearances. When trust erodes, so does morale, and then comes the layoff rumor mill, spinning like a prize wheel at a sad casino.
- And customers? They may not read the financials, but they sure know when something is up. A scandal, a shake-up, a news blip about embezzlement or “accounting irregularities” and suddenly your once-loyal clientele is test-driving elsewhere, wondering what else you’ve been hiding.
The cure? A little less magic, a little more math. Regular audits. Internal controls. Leadership that values ethics over excuses. Because while silence may be golden in a movie theater, in dealership accounting it’s usually a sign that someone’s hiding something—and eventually, it costs a whole lot more than just money.
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