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Will You Add? - Death of an Automobile Dealership
Accounts Receivable Financing and Accounts Receivable Factoring are two terms that are interchangeably used, but there is a major difference between them. Although both refer to the concept of extending cash to an owner of a business in lieu of invoices and other Accounts Receivable, there are differences, no matter how subtle.First of all, Accounts Receivable Financing is a loan in which the invoices are used as collateral. But this not the case with Accounts Receivable Factoring. Accounts Receivable Factoring is not a loan. It involves the selling of the invoices to the financing company at a rate less than the face value of the invoices. The financing companies then collect the money at the full face value from the clients. This means the business no longer has the responsibility of collecting the money.But this is not the case in Accounts Receivable Financing. The process of Financing involves the extension of an advance on the percentage of each invoice??bf?s amount. Also, the responsibility of collecting the money remains with the business house.Both Account Receivable Funding and Financing companies charge additional fees for services rendered, but in case of Account Receivable Factoring, the fees charged are comparatively higher. This is mainly because the entire responsibility of collecting the money is with the financing company.Companies providing Account Receivable Financing step in and work with companies who cannot get loans otherwise. Account Receivable Factoring, on the other hand, proves useful to business houses urgently in need of ready cash flow.This said, both Account Receivable Factoring and Financing prove extremely convenient to companies who urgently require a cash flow to keep their business going.
The selling dealer should make certain that vehicle receivables and customer accounts, other than service and parts, are pure. Necessary adjustments and write-offs should be made, with the purpose of arriving at a receivable figure which realistically depicts the amount of cash which can be expected.
If the dealership's service and parts policy has been well monitored, these accounts should pay in an orderly manner. In addition, the dealer should decide whether collections should be performed by dealer, and one or more employees, or whether the dealer can sell the accounts to a factoring house.
17. Leased Equipment
Not all leases can be cancelled. The dealer should determine which, if any, of the leases have personal guarantees, and with respect to such leases, make a concerted effort to negotiate a settlement with the lessor. That assumes that the corporation is insolvent. If the corporation is solvent, than settlements need to be negotiated with respect to corporate leases.
18. EPA Inspection
If the real property is owned by the closing dealer, it is important for the dealer to determine where and what the problems are likely to be. If underground gas or oil storage tanks have ever been located on the dealership real property, the dealer should, if not already available, contact a private inspection agency and obtain a certificate of clearance, or compliance, with respect to it.
Be aware, no agreements between the parties can modify, or redistribute their respective liabilities, with respect to state and federal laws.
19. Expenses of Transaction
There are certain extraordinary expenses, such as real estate appraisal fees, consultant fees, attorney and accounting fees, which are incidental to the preparing a dealership for closing. These expenses will be paid both from the dealership general account and directly from the closing dealer's personal account. The dealer should alert the bookkeeper to maintain a separate journal, in which to record these expenses, in order that the accountants may readily determine the costs of sale and categories of expenditures, for income tax purposes, both personal and business.
Closing Date
Absent exigent circumstances, the dealer should estimate the amount of time necessary to prepare the store for closing, usually approximately thirty days. If possible, the closing should be on a payday.
The Comptroller’s Responsibilities
The Dealer's comptroller should prepare, or be responsible for the preparation of, the following items and documents, for transfer:
The Books & Records;
All Purchase Orders and Deposits;
The Franchise Termination Letter and the Factory's, or Distributor's Acceptance of the Buyer's Resignation;
The Accounts Receivable List;
Prepaid Expenses;
Preparing a Leased Equipment Inventory;
Securing Old Credit card plates and Machines;
The Parts and Accessories Return, Vehicle Return, and Rent Assistance Demand Letters;
The Transfer and/or cancellation of various: Telephone Numbers; Post Office Boxes;
The insurance arrangements: life, garage keeper's tail, real and personal property, health, etc.
The Dealer’s Responsibilities
The Dealer should prepare, or be responsible for reviewing and supervising all of the items in the checklist and for the preparation of the following items:
Decide on the employees that are required to stay in order to complete the closing of the store.
Check for sold orders decide whether to deliver, cancel, or refer to another dealer.
Cancel company credit cards, including any phone credit cards and any mobile phones - except your own.
Secure telephone service. Set a Voice Mail message regarding a dealership referral.
DETERMINE THE FACTORY'S OBLIGATIONS WITH RESPECT TO ITS RIGHTS TO LEASE AND PURCHASE. BE SURE TO MAKE CLAIMS AND REQUESTS FOR ASSISTANCE WITHIN THE TIME PERIOD SPECIFIED IN THE SALES AND SERVICE AGREEMENT.
If necessary, talk to a Realtor and list the facility on the market (lease or sale).
Find out where credit card monies are deposited and move the account if it is in the same bank where the company's general account resides.
Close out, or transfer to another dealer all active service ROs. If possible, negotiate a referral fee.
Create a press release for store closing.
Cancel all new vehicle orders that are not scheduled, do not order any new cars.
Close out all service ROs so that work is completed by date of close. Do not accept any work that can't be completed by store shutdown date.
As always, when closing a dealership, you should always consult with
Are you a small to medium sized business owner? If so, are all of your duties and tasks performed by your own employees, under your own roof? If so, you may want to consider outsourcing a number of your business services. This doesn’t necessarily mean that you have to eliminate a portion of your staff, but it does mean that you can give them additional, more important tasks to focus on.One of the many services that you may want to consider outsourcing to another individual or company is your business mail. If you choose to do this, you will likely be seeking a business mail service. A business mail service specializes in handling your business mail for you. Depending on the type of business you run, this may help to eliminate a good portion of your work or the work of your employees.One of the most common business mail services offered, from a business mail forwarding service, is mail forwarding. Mail forward is most often used when a business owner, just like you, wants to acquire a well-known business address. See, most mail forwarding services give you an alternative business address. This address is where your incoming mail will first arrive. In most cases, your new, alternative business address will be located in a large, well-known city, such as New York City. After your mail has arrived at the mail forwarding service headquarters, your mail will then be shipped on to you, at your physical business address.Although mail forwarding is the most common type of service offered, there are additional business mail services that are commonly offered. One of these services includes mail sorting. If your mail is marked to go to the appropriate department or person, your business mail forwarding service should be able to sort out your mail for you. This is often done by grouping all of your mail together and sending it to you that way, all sorted. Depending on the specific business mail services available to you, you may even be able to have a portion of your mail, or junk mail, thrown away. Eliminating your junk mail, before it reaches your business, will save you time.If you are interested in learning about additional business mail services that may be available to you, you are urged to contact an individual or company who offers these types of services. Perhaps, it is best to use the internet. A standard internet search should provide you with the results that you are looking for. Those results, which should include 1-800 We Answer may help make it easier for you and your business to achieve success
THIS CHECKLIST IS NOT "ALL INCLUSIVE". YOU SHOULD CONSULT WITH YOUR ATTORNEY AND ACCOUNTANT AND THIS LIST SHOULD BE CONSIDERED AS AN ADDITIONAL AID FOR YOU TO USE TO BUILD UPON WHEN YOU CONFER WITH THEM.
Basic Preparation
1. Officers, Directors and Shareholders
Be certain to hold both directors and shareholders meetings and to obtain resolutions from each entity, authorizing the dealer to liquidate the dealership, or a substantial portion of the dealership's assets.
Determine whether or not the board and shareholders may authorize you a termination bonus and prepay your for your services in "winding down the business". Consult with your accountant and attorney to determine what would be a reasonable amount of compensation in the event a company creditor challenges the transaction.
Determine if it is reasonable for officers to buy themselves and their spouse vehicles. Pay "Net" "Net", as that would be the sales price if the vehicle were returned to the factory or sold to a purchaser of the business.
The officers should open a new bank account, at a different bank, and: (a) use a PO Box, or Private Mail Service as a mailing address; and (b) use a different check color in order to easily determine pre and post closing checks written.
Authorize payment to and pre-pay the company's attorney and accountant with a retainer. Their services will be needed to properly close the business and the company might not be able to pay them later.
Authorize pre-payment of whatever services or supplies the company will need to be serviced during the wind-down period. For example, property and personal insurance, real property taxes (if the property is not owned by a third party), rent, utilities and such.
2. The Facility and Insurance
A one-sheet summary of the lease should be attached to the original, in order to facilitate matters. The summary should include such items as: the dates of the base term; the base rent; the current rent; the dates of any option periods, together with notations regarding rent increases; the facility ownership; the lessee and lessor; a notation as to whether or not the factory has point, or site protection; the rent as an equivalent to the dollar value per new unit sold; and, a notation as to WHETHER OR NOT THE LEASE IS ASSIGNABLE and under what conditions.
Other considerations regarding the facility lease include violations of the ADA, hazardous materials (underground gas tanks, or underground oil disposal tanks) being located on the property.
Owned Facilities
With respect to receiving "factory termination assistance", some Sales and Service Agreements, General Motors for example, make a distinction between "owner occupied" and "leased" dealership facilities. Be sure to read your Sales and Service Agreement in order to understand and be able to capitalize on the distinctions.
Leased Facilities
If the selling dealer's rent factor prior to the sale of the dealership is within factory guidelines the factory should make the dealer's lease payments for the period specified in the Service and Sales Agreement. (See, however, the EPA section.)
Check with your insurance agent to determine the requirements for insuring an empty building.
Other Insurance
In addition to facility insurance the dealer will need a "tail" or rider on his or her garage keepers insurance. Most insurance today is "claims made" versus "occurrence".
In actual practice, most cases that are settled are settled within the insurance policy limits and the insurance company will have paid for both the defense and the settlement.
With respect to Medical Insurance, arrange for COBRA all employees of the company. Again, officers and directors may be able to include medical insurance payments as part of their wind-down compensation.
3. UCC, Mechanic’s Lien and Title Searches
Most dealers are not cognizant of all existing liens on dealership's assets.
In order to accurately estimate the selling dealer's anticipated net proceeds, all of these liens will have to be discovered, preferably, prior to negotiations.
Possession of title reports and UCC-1 reports will give the dealer adequate time to address the issues and to have readily available answers, if and when a prospective purchaser raises the issue.
4. Taxes Due and Anticipated
The dealership's comptroller or accountant, should prepare a sheet of all taxes currently owed by the dealership and all anticipated taxes. The list should identify the amount, to who owed and the reason. In certain states unpaid taxes have a "superlien" status and if unpaid the selling dealer's assets can and will be attached to recover unpaid taxes due by the selling dealership. This attachment can occur months after the dealership has closed.
As a general rule, anyone authorized to sign on the checking account can be held personally liable for at least ? of the payroll withholding tax, as well as 100% of all of the sales taxes due. In addition, in some instances dealers have been held personally liable for monies collected from customers that should have been treated as "trust" monies, such as: customer trade payoffs, customer credit and life insurance premiums, and customer warranty and service contract premiums.
5. Notes and Accounts Receivable From Others
The "Notes and Accounts Receivable - Other" account is usually a "catch-all" account on the dealership statement. For purposes of a dealership sale, this account should be purified (1) in order to apprise the dealer of any extra funds, which may be available for final sales and property taxes and (2) to make both the dealer and accountant aware of any "in-house" loans to officers, directors and employees, which may have to be repaid.
6. Prepaid Expenses
The prepaid expense account is another "catch-all" account that must be purified. When scheduling the prepaid expense account the comptroller should make a thorough search for all lease and contract deposits. In many instances, service equipment on lease, vehicles on lease, computers on lease, and other leases made to the dealership carry security deposits, or the last month's payment, or both.
7. Dealership Employees
Along with the normal employer-employee relations, there are two very important legal areas that may affect automobile dealers: (a) pension fund liability; and (b) state and federal laws regarding closings.
In some states the selling dealer could be personally liable for funding employee pension funds; while in others the dealer must give employees advance notice of any closing. Also, the United States Congress passed legislation regarding "closings". In the instances of "closings", both state and federal laws put a minimum on the number of persons employed, usually 50 or 100, before the law applies to the dealer's company. Check the Hart Scott Rodino Act (HSR) and the WARN Act.
With respect to wages, some jurisdictions have enacted statutes making certain shareholders personally liable for corporate debts owing to laborers and other employees. Welfare and pension funds also qualify as wages under New York's statute.
The comptroller, or accountant should prepare a list of these liabilities, to include any amounts due the employees, with respect to accrued vacations, withholding taxes, pension and profit sharing plans and wages, as of the date of close.
Insofar as the actual terminations are concerned, if the dealership is "union", the dealer should talk to the union's representative in order to be sure that all of the conditions of the union contract are met.
8. Long Term Debt
All long-term debt should be itemized and a method of repayment determined. Interest should be computed. When past due interest and past due payments are added to the loan balance, the loan pay-offs are generally higher than anticipated.
The comptroller should prepare a list of these debts, to include the amount owed including interest, to who owed, purpose of debt, maturity, terms and security given. In addition, after the list is completed, the comptroller should keep a running total, daily, through close of escrow.
9. Other Notes Payable
As with long-term debt, other notes payable should be listed by amount including interest to date of close, to whom owed, purpose of note, maturity, terms and security given; and arrangements should be made to retire the debt.
10. The Financial Statements
The retail automobile business is one of the few businesses requiring a complete closing of all books and records, promptly, at the end of each and every month. Factories and finance companies require reporting on factory originated, or approved forms.
In preparing the store for closing, a reconciliation statement may be used, explaining categories such as "other income & expense", warranty, finance and insurance income not shown on the statement, along with extraordinary items.
You will need a final financial statement for tax purposes.
11. Storage of Records
Dealerships amass a great deal of paperwork, the safe, accessible, storage of which will present a necessary problem to the selling dealer. No dealership record will be as important as it is on the day it cannot be found. Former dealers have related stories of attempting to retrieve documents from mini-storage facilities, in both rain and snow.
The appropriate time period should be determined, only after the dealer's accountant and attorney have considered and advised the dealer with respect to statute of limitations problems and other document retention regulations, peculiar to the political area in which dealership is located.
12. In-House Service Contracts
If the dealer has sold any "in-house service contracts", the selling dealer will not want former customers calling at his or her home for repairs, or complaints; therefore, a system of service, along the following lines, should be negotiated with a dealer located in close proximity to the closing store.
13. The Hard Assets
Parts and Accessories
Each factory has its own definition of "returnable" parts and returnable accessories. Most also include a discount for packing and shipping.
Just prior to closing, a computer printout ought to be obtained listing all parts and accessories, their purchase date and cost in invoice.
Parts and Accessories need to be segregated into "returnable" and "non-returnable" categories. Returnable parts and accessories need to be inventoried and packaged according to the factory's specifications
Non-returnable items need to be marketed to other dealers or parts houses such as "Napa". Note: Some "non-returnable" parts may in fact be returnable to the supplier from who it was purchased, such as Delco, MotorCraft, Mopar, Napa, etc.
Do not mark on or damage original packages when inventorying or packing as some factories will not classify items in marked packages as "returnable".
Be sure to account for aftermarket items such as Gas, Oil & Grease, Nuts, Bolts, Supplies, Work in Process and Repair Order (Need to collect A/Rs), Signs, Tools, Miscellaneous Equipment & Supplies.
Furniture, Fixtures and Equipment
The hard assets fall into two categories: (a) Those repurchased by the factory, such as special tools, parts equipment, signs, some computer systems, etc.; and those not repurchased by the factory, such as desks, chairs, etc.
Repurchased and non-repurchased items should be segregated and an inventory / auction service contacted to bid the auction on the non-repurchased items. When considering the auction, terms such as advertising time, location, minimum bids, guaranteed minimums from the auctioneer, and so forth, must be considered.
Leasehold Improvements
The value of Leasehold Improvements is generally lost in the termination process.
Vehicles
While accomplishing a new vehicle inventory valuation is a relatively, routine matter, it is also time consuming; consequently, in order for a dealer to realize full value, or each vehicle, at time of transfer, a checklist must be compiled and maintained. There are certain additions to, and subtractions from, the invoice price that must be made.
The difference in cash to be paid by purchaser's flooring entity to the dealer's flooring institution can be considerable, especially with respect to domestic lines, where holdback monies routinely average between $400 and $600 per unit, or more.
A dealer needs to be aware of this figure, early on in order to provide for the contingency during negotiations.
Various states have laws more liberal than the factory's Sales and Service Agreements and the specific laws of the terminating dealer's jurisdiction should be review. For example, Maine requires that the factory repurchase terminating dealers' entire new vehicle inventory, regardless of model year. Some states require the factory repurchase only current model year vehicles and others current plus one year carry-over.
In MSO states, the dealer should control all vehicle keys and MSOs - if the lender does not already have them.
Prepare to liquidate used vehicles and any dealership vehicles such as parts trucks, courtesy vans, demonstrators and snow plows. It is generally easier to obtain a good price for them by not letting anyone "cherry pick". Several wholesales should bid them as a "group".
Make list of carryovers and if the factory will not repurchase them have the wholesalers bid them separately and also shop them with other dealers.
Dealer plates must be surrendered and accounted for when the dealer license is terminated.
13. Appraisals and Auctions
There are a number of competent, recognized appraisers, our firm could recommend. In order to maximize the dollar value of an appraisal or auction, the dealer should contact several firms, determine how they operate, what records will be required, the method for valuing. After obtaining such information, the dealer should know the precise form and schedules necessary in order to maximize the appraisal or sale of the fixed assets. In addition, by assigning an employee to thoroughly prepare the assets and schedules, the dealer will better understand the value of the assets at the premises.
Perhaps the greatest problems, with respect to appraisals and auctions, are: (1) neither party takes the time to understand the methods and reasoning used by the appraisal/auction company; and (2) the dealer almost never adequately prepares the assets and schedules. We invariably find that all of the dealership's assets do not appear on schedules, either because they have been fully depreciated, or because of an error.
14. Contracts for Services
Service maintenance contracts and personal service contracts should be reviewed for personal guarantees, term and assignability. An oversight could mean that personal liability, for performance, would remain with the selling dealer. Service maintenance contracts should be scheduled, with the detail indicating the amount of each payment, duration of agreement, service to be rendered, and any personal liability. Any contracts that can be cancelled should be calendared for cancellation.
15. Contingent Liability and Reserves
The dealer should know the amount of all outstanding retail paper, which has been unconditionally guaranteed by the dealership, or the dealer. The dealer should know which the dealership's reserve account will be subject to charge backs, for early payoffs and the amount, if any, of recourse against the dealer and the dealership.
A spreadsheet of the outstanding contracts should be compiled, detailing, in addition to collateral description, remaining term and delinquency status, and credit grade, such as A, B, or C, or whatever system the finance company uses. The type of recourse, average monthly reserve charge-backs and the current reserve balance should also be included.
Shortly after informing the financing institutions of the dealer's intent to close the dealership, the lenders should again be approached, regarding the availability of any "walk-away" programs. Furthermore, in the event the dealership has been operating with reduced reserve retention, the amount required to bring the reserve(s) to standard, upon cessation of retail operations, should be determined. On occasion, this amount has proved to be significant.
Eventually, when confidentiality is no longer an issue, the dealer should discuss with the lender, the handling of future repossessions, extensions, renewals and other maintenance functions. If the prior dealer-lender relationship was good, the dealer will discover that an incredible amount of help available from a cooperative finance company.
Lastly, if the dealer discovers a large contingency, a certain degree of assistance may be negotiated with the buyer.
16. Accounts Receivable and Cash
Cash
While apparently obvious, dealership cash must be considered. Generally a new checking account should be opened at a financial institution that is not affiliated with the dealer's current business. Also, if possible, a locally owned bank should be used, versus a national bank. The dealer should consider reducing the number of signatories on the checking account(s) to two, one of which is the dealer and, effective the day of the close, the number of signatories should be reduced to the dealer principal only.
Factory Receivables
From the moment a decision to close the store is reached, factory receivables should receive concentrated attention. The very instant an awareness of the pending closing reaches the factory, the payments cease.
Try to resolve all problem receivables, such as warranty disputes, well before the closing. In any event, assistance from the factory, following the close of escrow will be essential to process warranty re-submissions and other problems. Employee Receivables
Employee receivables should also be thoroughly analyzed during this preliminary stage. An immediate policy, of no advances, should be established.
Without causing alarm, employee receivables should be scheduled and a course of repayment established. One of the better methods is to prepare a schedule of what each employee owes and, as the final pay periods approach, make certain the receivables are deducted from the employee's final checks. Unfortunately, some states do not allow the dealer to set-off debts against wages. Your state's policy/law should be reviewed with your attorney before proceeding to set-off any employee debt.
Customer and Vehicle Receivables
The selling dealer should make certain that vehicle receivables and customer accounts, other than service and parts, are pure. Necessary adjustments and write-offs should be made, with the purpose of arriving at a receivable figure which realistically depicts the amount of cash which can be expected.
If the dealership's service and parts policy has been well monitored, these accounts should pay in an orderly manner. In addition, the dealer should decide whether collections should be performed by dealer, and one or more employees, or whether the dealer can sell the accounts to a factoring house.
17. Leased Equipment
Not all leases can be cancelled. The dealer should determine which, if any, of the leases have personal guarantees, and with respect to such leases, make a concerted effort to negotiate a settlement with the lessor. That assumes that the corporation is insolvent. If the corporation is solvent, than settlements need to be negotiated with respect to corporate leases.
18. EPA Inspection
If the real property is owned by the closing dealer, it is important for the dealer to determine where and what the problems are likely to be. If underground gas or oil storage tanks have ever been located on the dealership real property, the dealer should, if not already available, contact a private inspection agency and obtain a certificate of clearance, or compliance, with respect to it.
Be aware, no agreements between the parties can modify, or redistribute their respective liabilities, with respect to state and federal laws.
19. Expenses of Transaction
There are certain extraordinary expenses, such as real estate appraisal fees, consultant fees, attorney and accounting fees, which are incidental to the preparing a dealership for closing. These expenses will be paid both from the dealership general account and directly from the closing dealer's personal account. The dealer should alert the bookkeeper to maintain a separate journal, in which to record these expenses, in order that the accountants may readily determine the costs of sale and categories of expenditures, for income tax purposes, both personal and business.
Closing Date
Absent exigent circumstances, the dealer should estimate the amount of time necessary to prepare the store for closing, usually approximately thirty days. If possible, the closing should be on a payday.
The Comptroller’s Responsibilities
The Dealer's comptroller should prepare, or be responsible for the preparation of, the following items and documents, for transfer:
The Books & Records;
All Purchase Orders and Deposits;
The Franchise Termination Letter and the Factory's, or Distributor's Acceptance of the Buyer's Resignation;
The Accounts Receivable List;
Prepaid Expenses;
Preparing a Leased Equipment Inventory;
Securing Old Credit card plates and Machines;
The Parts and Accessories Return, Vehicle Return, and Rent Assistance Demand Letters;
The Transfer and/or cancellation of various: Telephone Numbers; Post Office Boxes;
The insurance arrangements: life, garage keeper's tail, real and personal property, health, etc.
The Dealer’s Responsibilities
The Dealer should prepare, or be responsible for reviewing and supervising all of the items in the checklist and for the preparation of the following items:
Decide on the employees that are required to stay in order to complete the closing of the store.
Check for sold orders decide whether to deliver, cancel, or refer to another dealer.
Cancel company credit cards, including any phone credit cards and any mobile phones - except your own.
Secure telephone service. Set a Voice Mail message regarding a dealership referral.
DETERMINE THE FACTORY'S OBLIGATIONS WITH RESPECT TO ITS RIGHTS TO LEASE AND PURCHASE. BE SURE TO MAKE CLAIMS AND REQUESTS FOR ASSISTANCE WITHIN THE TIME PERIOD SPECIFIED IN THE SALES AND SERVICE AGREEMENT.
If necessary, talk to a Realtor and list the facility on the market (lease or sale).
Find out where credit card monies are deposited and move the account if it is in the same bank where the company's general account resides.
Close out, or transfer to another dealer all active service ROs. If possible, negotiate a referral fee.
Create a press release for store closing.
Cancel all new vehicle orders that are not scheduled, do not order any new cars.
Close out all service ROs so that work is completed by date of close. Do not accept any work that can't be completed by store shutdown date.
As always, when closing a dealership, you should always consult with
David Thorp, Head of Insights at the Chartered Institute of Marketing (CIM) noted,"Marketers should be at the forefront of this change as the key communicators of the brand and organisational values. In the future, marketing will be as much about changing attitudes and behaviours as it is about increasing market share".And, of course, there is a conflict in sustainability, which I’ll talk about in a minute. First let’s look at how sustainability is being pushed by our industry.The GreenAwardsThe 2006 GreenAwards celebrated and rewarded marketing that communicates sustainability through one of these categories: Press advertisement TV advertisement Radio advertisement Outdoor advertisement Online advertisement Direct mail B2C and B2B PR Packaging design They do have more award categories but it’s clear that, other than for packaging design, the award categories are rewarding the message and the way the message is presented, rather than encouraging marketers themselves to use more sustainable ways of communicating their message.The Direct Marketing Association (DMA) The Direct Marketing Association (DMA) has thoughtfully produced an ebook called "Producer Responsibility for Direct Mail and Promotions" and is available for download from their web site.In addition the DMA has formed a relationship with PlanetArk.org, co-founded by tennis player Pat Cash and partnered with Reuters. PlanetArk is aimed at increasing the world’s environmental awareness and activity. The relationship with the DMA is to reduce the direct mail sent to landfill in the UK.The aim here is for people to sign-up to the mailing preference service so that the amount of mail delivered is reduced.PlanetArk and the DMA issue postcards to publicise the mailing preference message through Citizen’s Advice centres and cafes throughout the UK. They’ve also run adverts in newspapers with the same message.The Conflict In Sustainability In The Daily Mail in August 2006 an article explained about a postman called Roger Annies who popped a leaflet through his residents letterboxes explaining how they could sign-up with the mailing preference service to avoid "junk mail."Unfortunately, whilst at least 70 of his customers sent in a request to stop direct mail, his bosses in The Royal Mail were not impressed and suspended him.The Royal Mail, and any other postal service, has a vested interest in delivering as much mail as their infrastructure can handle. Otherwise they’re not maximising their revenues.And this example really highlights the ambiguity of sustainability within marketing.On the one hand institutions, such as the DMA, are able to suggest grand targets for improving sustainability in marketing. In this case direct mail. And on the other hand companies that are earning revenue
As a general rule, anyone authorized to sign on the checking account can be held personally liable for at least ? of the payroll withholding tax, as well as 100% of all of the sales taxes due. In addition, in some instances dealers have been held personally liable for monies collected from customers that should have been treated as "trust" monies, such as: customer trade payoffs, customer credit and life insurance premiums, and customer warranty and service contract premiums.
5. Notes and Accounts Receivable From Others
The "Notes and Accounts Receivable - Other" account is usually a "catch-all" account on the dealership statement. For purposes of a dealership sale, this account should be purified (1) in order to apprise the dealer of any extra funds, which may be available for final sales and property taxes and (2) to make both the dealer and accountant aware of any "in-house" loans to officers, directors and employees, which may have to be repaid.
6. Prepaid Expenses
The prepaid expense account is another "catch-all" account that must be purified. When scheduling the prepaid expense account the comptroller should make a thorough search for all lease and contract deposits. In many instances, service equipment on lease, vehicles on lease, computers on lease, and other leases made to the dealership carry security deposits, or the last month's payment, or both.
7. Dealership Employees
Along with the normal employer-employee relations, there are two very important legal areas that may affect automobile dealers: (a) pension fund liability; and (b) state and federal laws regarding closings.
In some states the selling dealer could be personally liable for funding employee pension funds; while in others the dealer must give employees advance notice of any closing. Also, the United States Congress passed legislation regarding "closings". In the instances of "closings", both state and federal laws put a minimum on the number of persons employed, usually 50 or 100, before the law applies to the dealer's company. Check the Hart Scott Rodino Act (HSR) and the WARN Act.
With respect to wages, some jurisdictions have enacted statutes making certain shareholders personally liable for corporate debts owing to laborers and other employees. Welfare and pension funds also qualify as wages under New York's statute.
The comptroller, or accountant should prepare a list of these liabilities, to include any amounts due the employees, with respect to accrued vacations, withholding taxes, pension and profit sharing plans and wages, as of the date of close.
Insofar as the actual terminations are concerned, if the dealership is "union", the dealer should talk to the union's representative in order to be sure that all of the conditions of the union contract are met.
8. Long Term Debt
All long-term debt should be itemized and a method of repayment determined. Interest should be computed. When past due interest and past due payments are added to the loan balance, the loan pay-offs are generally higher than anticipated.
The comptroller should prepare a list of these debts, to include the amount owed including interest, to who owed, purpose of debt, maturity, terms and security given. In addition, after the list is completed, the comptroller should keep a running total, daily, through close of escrow.
9. Other Notes Payable
As with long-term debt, other notes payable should be listed by amount including interest to date of close, to whom owed, purpose of note, maturity, terms and security given; and arrangements should be made to retire the debt.
10. The Financial Statements
The retail automobile business is one of the few businesses requiring a complete closing of all books and records, promptly, at the end of each and every month. Factories and finance companies require reporting on factory originated, or approved forms.
In preparing the store for closing, a reconciliation statement may be used, explaining categories such as "other income & expense", warranty, finance and insurance income not shown on the statement, along with extraordinary items.
You will need a final financial statement for tax purposes.
11. Storage of Records
Dealerships amass a great deal of paperwork, the safe, accessible, storage of which will present a necessary problem to the selling dealer. No dealership record will be as important as it is on the day it cannot be found. Former dealers have related stories of attempting to retrieve documents from mini-storage facilities, in both rain and snow.
The appropriate time period should be determined, only after the dealer's accountant and attorney have considered and advised the dealer with respect to statute of limitations problems and other document retention regulations, peculiar to the political area in which dealership is located.
12. In-House Service Contracts
If the dealer has sold any "in-house service contracts", the selling dealer will not want former customers calling at his or her home for repairs, or complaints; therefore, a system of service, along the following lines, should be negotiated with a dealer located in close proximity to the closing store.
13. The Hard Assets
Parts and Accessories
Each factory has its own definition of "returnable" parts and returnable accessories. Most also include a discount for packing and shipping.
Just prior to closing, a computer printout ought to be obtained listing all parts and accessories, their purchase date and cost in invoice.
Parts and Accessories need to be segregated into "returnable" and "non-returnable" categories. Returnable parts and accessories need to be inventoried and packaged according to the factory's specifications
Non-returnable items need to be marketed to other dealers or parts houses such as "Napa". Note: Some "non-returnable" parts may in fact be returnable to the supplier from who it was purchased, such as Delco, MotorCraft, Mopar, Napa, etc.
Do not mark on or damage original packages when inventorying or packing as some factories will not classify items in marked packages as "returnable".
Be sure to account for aftermarket items such as Gas, Oil & Grease, Nuts, Bolts, Supplies, Work in Process and Repair Order (Need to collect A/Rs), Signs, Tools, Miscellaneous Equipment & Supplies.
Furniture, Fixtures and Equipment
The hard assets fall into two categories: (a) Those repurchased by the factory, such as special tools, parts equipment, signs, some computer systems, etc.; and those not repurchased by the factory, such as desks, chairs, etc.
Repurchased and non-repurchased items should be segregated and an inventory / auction service contacted to bid the auction on the non-repurchased items. When considering the auction, terms such as advertising time, location, minimum bids, guaranteed minimums from the auctioneer, and so forth, must be considered.
Leasehold Improvements
The value of Leasehold Improvements is generally lost in the termination process.
Vehicles
While accomplishing a new vehicle inventory valuation is a relatively, routine matter, it is also time consuming; consequently, in order for a dealer to realize full value, or each vehicle, at time of transfer, a checklist must be compiled and maintained. There are certain additions to, and subtractions from, the invoice price that must be made.
The difference in cash to be paid by purchaser's flooring entity to the dealer's flooring institution can be considerable, especially with respect to domestic lines, where holdback monies routinely average between $400 and $600 per unit, or more.
A dealer needs to be aware of this figure, early on in order to provide for the contingency during negotiations.
Various states have laws more liberal than the factory's Sales and Service Agreements and the specific laws of the terminating dealer's jurisdiction should be review. For example, Maine requires that the factory repurchase terminating dealers' entire new vehicle inventory, regardless of model year. Some states require the factory repurchase only current model year vehicles and others current plus one year carry-over.
In MSO states, the dealer should control all vehicle keys and MSOs - if the lender does not already have them.
Prepare to liquidate used vehicles and any dealership vehicles such as parts trucks, courtesy vans, demonstrators and snow plows. It is generally easier to obtain a good price for them by not letting anyone "cherry pick". Several wholesales should bid them as a "group".
Make list of carryovers and if the factory will not repurchase them have the wholesalers bid them separately and also shop them with other dealers.
Dealer plates must be surrendered and accounted for when the dealer license is terminated.
13. Appraisals and Auctions
There are a number of competent, recognized appraisers, our firm could recommend. In order to maximize the dollar value of an appraisal or auction, the dealer should contact several firms, determine how they operate, what records will be required, the method for valuing. After obtaining such information, the dealer should know the precise form and schedules necessary in order to maximize the appraisal or sale of the fixed assets. In addition, by assigning an employee to thoroughly prepare the assets and schedules, the dealer will better understand the value of the assets at the premises.
Perhaps the greatest problems, with respect to appraisals and auctions, are: (1) neither party takes the time to understand the methods and reasoning used by the appraisal/auction company; and (2) the dealer almost never adequately prepares the assets and schedules. We invariably find that all of the dealership's assets do not appear on schedules, either because they have been fully depreciated, or because of an error.
14. Contracts for Services
Service maintenance contracts and personal service contracts should be reviewed for personal guarantees, term and assignability. An oversight could mean that personal liability, for performance, would remain with the selling dealer. Service maintenance contracts should be scheduled, with the detail indicating the amount of each payment, duration of agreement, service to be rendered, and any personal liability. Any contracts that can be cancelled should be calendared for cancellation.
15. Contingent Liability and Reserves
The dealer should know the amount of all outstanding retail paper, which has been unconditionally guaranteed by the dealership, or the dealer. The dealer should know which the dealership's reserve account will be subject to charge backs, for early payoffs and the amount, if any, of recourse against the dealer and the dealership.
A spreadsheet of the outstanding contracts should be compiled, detailing, in addition to collateral description, remaining term and delinquency status, and credit grade, such as A, B, or C, or whatever system the finance company uses. The type of recourse, average monthly reserve charge-backs and the current reserve balance should also be included.
Shortly after informing the financing institutions of the dealer's intent to close the dealership, the lenders should again be approached, regarding the availability of any "walk-away" programs. Furthermore, in the event the dealership has been operating with reduced reserve retention, the amount required to bring the reserve(s) to standard, upon cessation of retail operations, should be determined. On occasion, this amount has proved to be significant.
Eventually, when confidentiality is no longer an issue, the dealer should discuss with the lender, the handling of future repossessions, extensions, renewals and other maintenance functions. If the prior dealer-lender relationship was good, the dealer will discover that an incredible amount of help available from a cooperative finance company.
Lastly, if the dealer discovers a large contingency, a certain degree of assistance may be negotiated with the buyer.
16. Accounts Receivable and Cash
Cash
While apparently obvious, dealership cash must be considered. Generally a new checking account should be opened at a financial institution that is not affiliated with the dealer's current business. Also, if possible, a locally owned bank should be used, versus a national bank. The dealer should consider reducing the number of signatories on the checking account(s) to two, one of which is the dealer and, effective the day of the close, the number of signatories should be reduced to the dealer principal only.
Factory Receivables
From the moment a decision to close the store is reached, factory receivables should receive concentrated attention. The very instant an awareness of the pending closing reaches the factory, the payments cease.
Try to resolve all problem receivables, such as warranty disputes, well before the closing. In any event, assistance from the factory, following the close of escrow will be essential to process warranty re-submissions and other problems. Employee Receivables
Employee receivables should also be thoroughly analyzed during this preliminary stage. An immediate policy, of no advances, should be established.
Without causing alarm, employee receivables should be scheduled and a course of repayment established. One of the better methods is to prepare a schedule of what each employee owes and, as the final pay periods approach, make certain the receivables are deducted from the employee's final checks. Unfortunately, some states do not allow the dealer to set-off debts against wages. Your state's policy/law should be reviewed with your attorney before proceeding to set-off any employee debt.
Customer and Vehicle Receivables
The selling dealer should make certain that vehicle receivables and customer accounts, other than service and parts, are pure. Necessary adjustments and write-offs should be made, with the purpose of arriving at a receivable figure which realistically depicts the amount of cash which can be expected.
If the dealership's service and parts policy has been well monitored, these accounts should pay in an orderly manner. In addition, the dealer should decide whether collections should be performed by dealer, and one or more employees, or whether the dealer can sell the accounts to a factoring house.
17. Leased Equipment
Not all leases can be cancelled. The dealer should determine which, if any, of the leases have personal guarantees, and with respect to such leases, make a concerted effort to negotiate a settlement with the lessor. That assumes that the corporation is insolvent. If the corporation is solvent, than settlements need to be negotiated with respect to corporate leases.
18. EPA Inspection
If the real property is owned by the closing dealer, it is important for the dealer to determine where and what the problems are likely to be. If underground gas or oil storage tanks have ever been located on the dealership real property, the dealer should, if not already available, contact a private inspection agency and obtain a certificate of clearance, or compliance, with respect to it.
Be aware, no agreements between the parties can modify, or redistribute their respective liabilities, with respect to state and federal laws.
19. Expenses of Transaction
There are certain extraordinary expenses, such as real estate appraisal fees, consultant fees, attorney and accounting fees, which are incidental to the preparing a dealership for closing. These expenses will be paid both from the dealership general account and directly from the closing dealer's personal account. The dealer should alert the bookkeeper to maintain a separate journal, in which to record these expenses, in order that the accountants may readily determine the costs of sale and categories of expenditures, for income tax purposes, both personal and business.
Closing Date
Absent exigent circumstances, the dealer should estimate the amount of time necessary to prepare the store for closing, usually approximately thirty days. If possible, the closing should be on a payday.
The Comptroller’s Responsibilities
The Dealer's comptroller should prepare, or be responsible for the preparation of, the following items and documents, for transfer:
The Books & Records;
All Purchase Orders and Deposits;
The Franchise Termination Letter and the Factory's, or Distributor's Acceptance of the Buyer's Resignation;
The Accounts Receivable List;
Prepaid Expenses;
Preparing a Leased Equipment Inventory;
Securing Old Credit card plates and Machines;
The Parts and Accessories Return, Vehicle Return, and Rent Assistance Demand Letters;
The Transfer and/or cancellation of various: Telephone Numbers; Post Office Boxes;
The insurance arrangements: life, garage keeper's tail, real and personal property, health, etc.
The Dealer’s Responsibilities
The Dealer should prepare, or be responsible for reviewing and supervising all of the items in the checklist and for the preparation of the following items:
Decide on the employees that are required to stay in order to complete the closing of the store.
Check for sold orders decide whether to deliver, cancel, or refer to another dealer.
Cancel company credit cards, including any phone credit cards and any mobile phones - except your own.
Secure telephone service. Set a Voice Mail message regarding a dealership referral.
DETERMINE THE FACTORY'S OBLIGATIONS WITH RESPECT TO ITS RIGHTS TO LEASE AND PURCHASE. BE SURE TO MAKE CLAIMS AND REQUESTS FOR ASSISTANCE WITHIN THE TIME PERIOD SPECIFIED IN THE SALES AND SERVICE AGREEMENT.
If necessary, talk to a Realtor and list the facility on the market (lease or sale).
Find out where credit card monies are deposited and move the account if it is in the same bank where the company's general account resides.
Close out, or transfer to another dealer all active service ROs. If possible, negotiate a referral fee.
Create a press release for store closing.
Cancel all new vehicle orders that are not scheduled, do not order any new cars.
Close out all service ROs so that work is completed by date of close. Do not accept any work that can't be completed by store shutdown date.
As always, when closing a dealership, you should always consult with
A major part of keeping profitable and growing your business is maintaining a focus on business development. Even when you've got the right mix of work, clients and employees you should be looking for new opportunities. You could establish a process to do this whilst ensuring your existing customers don't get neglected. The process helps you manage new business opportunities in a cost- and time-effective manner.Generate leads Identify the types of companies you want to work with and a realistic number of companies you want to target over a given period of time. For example: an accountant with experience in the marketing industry might decide to target five opportunities per month focussed on marketing consultancies.Finding potential clients and identifying new opportunities can be done through networking events, tenders listed in newspapers and industry magazines and headlines in newspapers about new projects and industry seminars. Keep an eye on your industry and stay aware of new developments.Track the companies you approach in a database ( you could use Microsoft Excel or Access). Tracking should cover the obvious things (company contact details etc) as well as details of what was discussed, potential works, actions and more.Qualify the leads Once you have a list of identified companies you must review to ensure they are realistic opportunities. Some areas to think about include:• Do you have the right contacts to get started?• Do you have the right services to offer them?• How can their website help you understand them better?• Do you have any conflicts of interest in pursuing this company?• Does this client have growth potential or would it be a quick job?• Who makes the decisions? How can you reach them?3. Raise your business profileBy raising your company profile (no matter how small you are) you'll be able to generate new business with less effort. As a leader in the industry new business will come to you. There are many ways to raise your profile; you could try sponsoring events, adverts and gaining media coverage. The size, location and target market of your business this will dictate what medium to use and the areas to cover.4. Show them what you're made of Start to reach your qualified opportunities by showcasing your company's products. Send them a brochure or a copy of any newsletters you produce and invite them to join; show off examples of your work; highlight relevant media articles.Develop standard template letters in Word to send to potential clients to accompany your credentials/brochures. Ensure you link to your database (Excel, Access or Outlook) when merging the letters and envelopes to ensure you don't have to re-enter details.There is no specified time for this courting so be patient. It c
The appropriate time period should be determined, only after the dealer's accountant and attorney have considered and advised the dealer with respect to statute of limitations problems and other document retention regulations, peculiar to the political area in which dealership is located.
12. In-House Service Contracts
If the dealer has sold any "in-house service contracts", the selling dealer will not want former customers calling at his or her home for repairs, or complaints; therefore, a system of service, along the following lines, should be negotiated with a dealer located in close proximity to the closing store.
13. The Hard Assets
Parts and Accessories
Each factory has its own definition of "returnable" parts and returnable accessories. Most also include a discount for packing and shipping.
Just prior to closing, a computer printout ought to be obtained listing all parts and accessories, their purchase date and cost in invoice.
Parts and Accessories need to be segregated into "returnable" and "non-returnable" categories. Returnable parts and accessories need to be inventoried and packaged according to the factory's specifications
Non-returnable items need to be marketed to other dealers or parts houses such as "Napa". Note: Some "non-returnable" parts may in fact be returnable to the supplier from who it was purchased, such as Delco, MotorCraft, Mopar, Napa, etc.
Do not mark on or damage original packages when inventorying or packing as some factories will not classify items in marked packages as "returnable".
Be sure to account for aftermarket items such as Gas, Oil & Grease, Nuts, Bolts, Supplies, Work in Process and Repair Order (Need to collect A/Rs), Signs, Tools, Miscellaneous Equipment & Supplies.
Furniture, Fixtures and Equipment
The hard assets fall into two categories: (a) Those repurchased by the factory, such as special tools, parts equipment, signs, some computer systems, etc.; and those not repurchased by the factory, such as desks, chairs, etc.
Repurchased and non-repurchased items should be segregated and an inventory / auction service contacted to bid the auction on the non-repurchased items. When considering the auction, terms such as advertising time, location, minimum bids, guaranteed minimums from the auctioneer, and so forth, must be considered.
Leasehold Improvements
The value of Leasehold Improvements is generally lost in the termination process.
Vehicles
While accomplishing a new vehicle inventory valuation is a relatively, routine matter, it is also time consuming; consequently, in order for a dealer to realize full value, or each vehicle, at time of transfer, a checklist must be compiled and maintained. There are certain additions to, and subtractions from, the invoice price that must be made.
The difference in cash to be paid by purchaser's flooring entity to the dealer's flooring institution can be considerable, especially with respect to domestic lines, where holdback monies routinely average between $400 and $600 per unit, or more.
A dealer needs to be aware of this figure, early on in order to provide for the contingency during negotiations.
Various states have laws more liberal than the factory's Sales and Service Agreements and the specific laws of the terminating dealer's jurisdiction should be review. For example, Maine requires that the factory repurchase terminating dealers' entire new vehicle inventory, regardless of model year. Some states require the factory repurchase only current model year vehicles and others current plus one year carry-over.
In MSO states, the dealer should control all vehicle keys and MSOs - if the lender does not already have them.
Prepare to liquidate used vehicles and any dealership vehicles such as parts trucks, courtesy vans, demonstrators and snow plows. It is generally easier to obtain a good price for them by not letting anyone "cherry pick". Several wholesales should bid them as a "group".
Make list of carryovers and if the factory will not repurchase them have the wholesalers bid them separately and also shop them with other dealers.
Dealer plates must be surrendered and accounted for when the dealer license is terminated.
13. Appraisals and Auctions
There are a number of competent, recognized appraisers, our firm could recommend. In order to maximize the dollar value of an appraisal or auction, the dealer should contact several firms, determine how they operate, what records will be required, the method for valuing. After obtaining such information, the dealer should know the precise form and schedules necessary in order to maximize the appraisal or sale of the fixed assets. In addition, by assigning an employee to thoroughly prepare the assets and schedules, the dealer will better understand the value of the assets at the premises.
Perhaps the greatest problems, with respect to appraisals and auctions, are: (1) neither party takes the time to understand the methods and reasoning used by the appraisal/auction company; and (2) the dealer almost never adequately prepares the assets and schedules. We invariably find that all of the dealership's assets do not appear on schedules, either because they have been fully depreciated, or because of an error.
14. Contracts for Services
Service maintenance contracts and personal service contracts should be reviewed for personal guarantees, term and assignability. An oversight could mean that personal liability, for performance, would remain with the selling dealer. Service maintenance contracts should be scheduled, with the detail indicating the amount of each payment, duration of agreement, service to be rendered, and any personal liability. Any contracts that can be cancelled should be calendared for cancellation.
15. Contingent Liability and Reserves
The dealer should know the amount of all outstanding retail paper, which has been unconditionally guaranteed by the dealership, or the dealer. The dealer should know which the dealership's reserve account will be subject to charge backs, for early payoffs and the amount, if any, of recourse against the dealer and the dealership.
A spreadsheet of the outstanding contracts should be compiled, detailing, in addition to collateral description, remaining term and delinquency status, and credit grade, such as A, B, or C, or whatever system the finance company uses. The type of recourse, average monthly reserve charge-backs and the current reserve balance should also be included.
Shortly after informing the financing institutions of the dealer's intent to close the dealership, the lenders should again be approached, regarding the availability of any "walk-away" programs. Furthermore, in the event the dealership has been operating with reduced reserve retention, the amount required to bring the reserve(s) to standard, upon cessation of retail operations, should be determined. On occasion, this amount has proved to be significant.
Eventually, when confidentiality is no longer an issue, the dealer should discuss with the lender, the handling of future repossessions, extensions, renewals and other maintenance functions. If the prior dealer-lender relationship was good, the dealer will discover that an incredible amount of help available from a cooperative finance company.
Lastly, if the dealer discovers a large contingency, a certain degree of assistance may be negotiated with the buyer.
16. Accounts Receivable and Cash
Cash
While apparently obvious, dealership cash must be considered. Generally a new checking account should be opened at a financial institution that is not affiliated with the dealer's current business. Also, if possible, a locally owned bank should be used, versus a national bank. The dealer should consider reducing the number of signatories on the checking account(s) to two, one of which is the dealer and, effective the day of the close, the number of signatories should be reduced to the dealer principal only.
Factory Receivables
From the moment a decision to close the store is reached, factory receivables should receive concentrated attention. The very instant an awareness of the pending closing reaches the factory, the payments cease.
Try to resolve all problem receivables, such as warranty disputes, well before the closing. In any event, assistance from the factory, following the close of escrow will be essential to process warranty re-submissions and other problems. Employee Receivables
Employee receivables should also be thoroughly analyzed during this preliminary stage. An immediate policy, of no advances, should be established.
Without causing alarm, employee receivables should be scheduled and a course of repayment established. One of the better methods is to prepare a schedule of what each employee owes and, as the final pay periods approach, make certain the receivables are deducted from the employee's final checks. Unfortunately, some states do not allow the dealer to set-off debts against wages. Your state's policy/law should be reviewed with your attorney before proceeding to set-off any employee debt.
Customer and Vehicle Receivables
The selling dealer should make certain that vehicle receivables and customer accounts, other than service and parts, are pure. Necessary adjustments and write-offs should be made, with the purpose of arriving at a receivable figure which realistically depicts the amount of cash which can be expected.
If the dealership's service and parts policy has been well monitored, these accounts should pay in an orderly manner. In addition, the dealer should decide whether collections should be performed by dealer, and one or more employees, or whether the dealer can sell the accounts to a factoring house.
17. Leased Equipment
Not all leases can be cancelled. The dealer should determine which, if any, of the leases have personal guarantees, and with respect to such leases, make a concerted effort to negotiate a settlement with the lessor. That assumes that the corporation is insolvent. If the corporation is solvent, than settlements need to be negotiated with respect to corporate leases.
18. EPA Inspection
If the real property is owned by the closing dealer, it is important for the dealer to determine where and what the problems are likely to be. If underground gas or oil storage tanks have ever been located on the dealership real property, the dealer should, if not already available, contact a private inspection agency and obtain a certificate of clearance, or compliance, with respect to it.
Be aware, no agreements between the parties can modify, or redistribute their respective liabilities, with respect to state and federal laws.
19. Expenses of Transaction
There are certain extraordinary expenses, such as real estate appraisal fees, consultant fees, attorney and accounting fees, which are incidental to the preparing a dealership for closing. These expenses will be paid both from the dealership general account and directly from the closing dealer's personal account. The dealer should alert the bookkeeper to maintain a separate journal, in which to record these expenses, in order that the accountants may readily determine the costs of sale and categories of expenditures, for income tax purposes, both personal and business.
Closing Date
Absent exigent circumstances, the dealer should estimate the amount of time necessary to prepare the store for closing, usually approximately thirty days. If possible, the closing should be on a payday.
The Comptroller’s Responsibilities
The Dealer's comptroller should prepare, or be responsible for the preparation of, the following items and documents, for transfer:
The Books & Records;
All Purchase Orders and Deposits;
The Franchise Termination Letter and the Factory's, or Distributor's Acceptance of the Buyer's Resignation;
The Accounts Receivable List;
Prepaid Expenses;
Preparing a Leased Equipment Inventory;
Securing Old Credit card plates and Machines;
The Parts and Accessories Return, Vehicle Return, and Rent Assistance Demand Letters;
The Transfer and/or cancellation of various: Telephone Numbers; Post Office Boxes;
The insurance arrangements: life, garage keeper's tail, real and personal property, health, etc.
The Dealer’s Responsibilities
The Dealer should prepare, or be responsible for reviewing and supervising all of the items in the checklist and for the preparation of the following items:
Decide on the employees that are required to stay in order to complete the closing of the store.
Check for sold orders decide whether to deliver, cancel, or refer to another dealer.
Cancel company credit cards, including any phone credit cards and any mobile phones - except your own.
Secure telephone service. Set a Voice Mail message regarding a dealership referral.
DETERMINE THE FACTORY'S OBLIGATIONS WITH RESPECT TO ITS RIGHTS TO LEASE AND PURCHASE. BE SURE TO MAKE CLAIMS AND REQUESTS FOR ASSISTANCE WITHIN THE TIME PERIOD SPECIFIED IN THE SALES AND SERVICE AGREEMENT.
If necessary, talk to a Realtor and list the facility on the market (lease or sale).
Find out where credit card monies are deposited and move the account if it is in the same bank where the company's general account resides.
Close out, or transfer to another dealer all active service ROs. If possible, negotiate a referral fee.
Create a press release for store closing.
Cancel all new vehicle orders that are not scheduled, do not order any new cars.
Close out all service ROs so that work is completed by date of close. Do not accept any work that can't be completed by store shutdown date.
As always, when closing a dealership, you should always consult with
MERRITT ISLAND FL-Most folks would be a little annoyed with a windy rainy gray Florida day. But not Tinho Dornellas. Tinho is an expert windsurfer and his life’s dream is to teach you how to be a windsurfer.This thirty-nine year old father of two boys operates out of an obscure Merritt Island, Florida shop in an area where most folks would think of storing furniture rather than buying a sailboard and learning how to use it.His shop is a few miles down the road fromthe legendary Ron-Jons Surf Shop in Cocoa Beach, Florida. But, Ron-Jon’s isn’t interested in Tinho’s share of the adventurous windsurfer market. To them, windsurfing is a little too tough for the tourists passing through on their vacations.Like so many others have discovered, it takes more than inventory to bein the windsurfing business. It takes a combination of knowledge, love of what you do, and courage. Tinho has never been in short supply of any of those characteristics. He proved that when he left his home in Angola, Africa when he was only eighteen .“I wanted to design boats,” say this engineer now turned windsurfing guru. “But, I didn’t want to push paper.” He put down his calculator and T-square and went off to teach surfing for Club Med? in Portugal.It was while he was waiting for a wave, he saw one. He watched as it glided across the waves and waited for nothing. He was in love.With the help and second income from his wife he met while he was instructing for Club Med in the Cayman Islands, Tinho opened Calema (meaning strong wind) Windsurfing.“I had two boards and if there were three customers in the store, it looked crowded,” he recalls with a smile. He watched other flashy stores open and close and soon had the formulaclearly in mind.To be successful in the windsurfing business, you had to love to teach and Tinho loves teaching. Tinho even has a portable store. You’ll find it parked next to the water on the North side of SR 520 as you head for Cocoa Beach. It’s a silver step van and it pulls a trailer full of different size boards and a variety of sails. He takes what’s needed to the place where it’s needed most but this isn’t the first stop for a novice windsurfing student. The first place will be the store for a little time on a simulator Tinho designed. Windsurfing is, after all, a combination of balance and physics. You’ll also notice a combination of the fearless young blond boys of summer weaving through the waves and leaning into the wind with the gray hairs of the retired set.“I gave up golf seven years ago,” a seventy-two year old former salesman from Michigan says as he ties his board securely on the rack of his small sports pickup. “Windsurfing gives me the right combination of exercise, fun, and inner peace.” The sparkle in his eyes confirmed his words.Calema Windsurfing is known world-wide in the windsurfing community but Tinho has had a little trouble getting advertising to work for him.“I tried some things
Perhaps the greatest problems, with respect to appraisals and auctions, are: (1) neither party takes the time to understand the methods and reasoning used by the appraisal/auction company; and (2) the dealer almost never adequately prepares the assets and schedules. We invariably find that all of the dealership's assets do not appear on schedules, either because they have been fully depreciated, or because of an error.
14. Contracts for Services
Service maintenance contracts and personal service contracts should be reviewed for personal guarantees, term and assignability. An oversight could mean that personal liability, for performance, would remain with the selling dealer. Service maintenance contracts should be scheduled, with the detail indicating the amount of each payment, duration of agreement, service to be rendered, and any personal liability. Any contracts that can be cancelled should be calendared for cancellation.
15. Contingent Liability and Reserves
The dealer should know the amount of all outstanding retail paper, which has been unconditionally guaranteed by the dealership, or the dealer. The dealer should know which the dealership's reserve account will be subject to charge backs, for early payoffs and the amount, if any, of recourse against the dealer and the dealership.
A spreadsheet of the outstanding contracts should be compiled, detailing, in addition to collateral description, remaining term and delinquency status, and credit grade, such as A, B, or C, or whatever system the finance company uses. The type of recourse, average monthly reserve charge-backs and the current reserve balance should also be included.
Shortly after informing the financing institutions of the dealer's intent to close the dealership, the lenders should again be approached, regarding the availability of any "walk-away" programs. Furthermore, in the event the dealership has been operating with reduced reserve retention, the amount required to bring the reserve(s) to standard, upon cessation of retail operations, should be determined. On occasion, this amount has proved to be significant.
Eventually, when confidentiality is no longer an issue, the dealer should discuss with the lender, the handling of future repossessions, extensions, renewals and other maintenance functions. If the prior dealer-lender relationship was good, the dealer will discover that an incredible amount of help available from a cooperative finance company.
Lastly, if the dealer discovers a large contingency, a certain degree of assistance may be negotiated with the buyer.
16. Accounts Receivable and Cash
Cash
While apparently obvious, dealership cash must be considered. Generally a new checking account should be opened at a financial institution that is not affiliated with the dealer's current business. Also, if possible, a locally owned bank should be used, versus a national bank. The dealer should consider reducing the number of signatories on the checking account(s) to two, one of which is the dealer and, effective the day of the close, the number of signatories should be reduced to the dealer principal only.
Factory Receivables
From the moment a decision to close the store is reached, factory receivables should receive concentrated attention. The very instant an awareness of the pending closing reaches the factory, the payments cease.
Try to resolve all problem receivables, such as warranty disputes, well before the closing. In any event, assistance from the factory, following the close of escrow will be essential to process warranty re-submissions and other problems. Employee Receivables
Employee receivables should also be thoroughly analyzed during this preliminary stage. An immediate policy, of no advances, should be established.
Without causing alarm, employee receivables should be scheduled and a course of repayment established. One of the better methods is to prepare a schedule of what each employee owes and, as the final pay periods approach, make certain the receivables are deducted from the employee's final checks. Unfortunately, some states do not allow the dealer to set-off debts against wages. Your state's policy/law should be reviewed with your attorney before proceeding to set-off any employee debt.
Customer and Vehicle Receivables
The selling dealer should make certain that vehicle receivables and customer accounts, other than service and parts, are pure. Necessary adjustments and write-offs should be made, with the purpose of arriving at a receivable figure which realistically depicts the amount of cash which can be expected.
If the dealership's service and parts policy has been well monitored, these accounts should pay in an orderly manner. In addition, the dealer should decide whether collections should be performed by dealer, and one or more employees, or whether the dealer can sell the accounts to a factoring house.
17. Leased Equipment
Not all leases can be cancelled. The dealer should determine which, if any, of the leases have personal guarantees, and with respect to such leases, make a concerted effort to negotiate a settlement with the lessor. That assumes that the corporation is insolvent. If the corporation is solvent, than settlements need to be negotiated with respect to corporate leases.
18. EPA Inspection
If the real property is owned by the closing dealer, it is important for the dealer to determine where and what the problems are likely to be. If underground gas or oil storage tanks have ever been located on the dealership real property, the dealer should, if not already available, contact a private inspection agency and obtain a certificate of clearance, or compliance, with respect to it.
Be aware, no agreements between the parties can modify, or redistribute their respective liabilities, with respect to state and federal laws.
19. Expenses of Transaction
There are certain extraordinary expenses, such as real estate appraisal fees, consultant fees, attorney and accounting fees, which are incidental to the preparing a dealership for closing. These expenses will be paid both from the dealership general account and directly from the closing dealer's personal account. The dealer should alert the bookkeeper to maintain a separate journal, in which to record these expenses, in order that the accountants may readily determine the costs of sale and categories of expenditures, for income tax purposes, both personal and business.
Closing Date
Absent exigent circumstances, the dealer should estimate the amount of time necessary to prepare the store for closing, usually approximately thirty days. If possible, the closing should be on a payday.
The Comptroller’s Responsibilities
The Dealer's comptroller should prepare, or be responsible for the preparation of, the following items and documents, for transfer:
The Books & Records;
All Purchase Orders and Deposits;
The Franchise Termination Letter and the Factory's, or Distributor's Acceptance of the Buyer's Resignation;
The Accounts Receivable List;
Prepaid Expenses;
Preparing a Leased Equipment Inventory;
Securing Old Credit card plates and Machines;
The Parts and Accessories Return, Vehicle Return, and Rent Assistance Demand Letters;
The Transfer and/or cancellation of various: Telephone Numbers; Post Office Boxes;
The insurance arrangements: life, garage keeper's tail, real and personal property, health, etc.
The Dealer’s Responsibilities
The Dealer should prepare, or be responsible for reviewing and supervising all of the items in the checklist and for the preparation of the following items:
Decide on the employees that are required to stay in order to complete the closing of the store.
Check for sold orders decide whether to deliver, cancel, or refer to another dealer.
Cancel company credit cards, including any phone credit cards and any mobile phones - except your own.
Secure telephone service. Set a Voice Mail message regarding a dealership referral.
DETERMINE THE FACTORY'S OBLIGATIONS WITH RESPECT TO ITS RIGHTS TO LEASE AND PURCHASE. BE SURE TO MAKE CLAIMS AND REQUESTS FOR ASSISTANCE WITHIN THE TIME PERIOD SPECIFIED IN THE SALES AND SERVICE AGREEMENT.
If necessary, talk to a Realtor and list the facility on the market (lease or sale).
Find out where credit card monies are deposited and move the account if it is in the same bank where the company's general account resides.
Close out, or transfer to another dealer all active service ROs. If possible, negotiate a referral fee.
Create a press release for store closing.
Cancel all new vehicle orders that are not scheduled, do not order any new cars.
Close out all service ROs so that work is completed by date of close. Do not accept any work that can't be completed by store shutdown date.
As always, when closing a dealership, you should always consult with
Knowledge is not intelligence. Knowledge is something you obtain after repeatedly performing a skill or being trained in a skill. Knowledge has nothing to do with intelligence. You can have an IQ of 212 but you would never have the knowledge about everything there is to know.But how do you obtain knowledge? Do you read books? Do you watch videos and attend seminars? Do you enroll in training courses? Do you communicate with people who have the knowledge you wish to obtain? The answer is YES to all four questions. But the problem is, many people don't know how to listen, read and communicate in order to obtain the knowledge provided to them.Here are some tips to help you increase your knowledge:Listening Skills1. Pay close attention to the answer a person gives after you ask them a question. Although this sounds simple to do, the problem occurs when the listener does not listen. Instead, they are contemplating what they are going to say next, or even concentrating on unrelated matters. It takes a little effort to truly listen to what people are saying and putting all your own thoughts out of your mind for a moment so you can learn from them.2. Maintain eye contact with the speaker. This is a good exercise to get into a habit of doing because it will help you to become less distracted or keep your thoughts from wondering.3. Avoid the human tendency to jump to conclusions about what is said before the speaker has finished. Instead, you should listen closely even if you think you know what the person is going to say. Think of yourself as a news reporter with unbiased views and gathering as much information as possible so you can write a detailed report later. Once you have fully understood and absorbed what the speaker is saying, you can form your own opinions at that time. But forming an opinion while the speaker is talking does not allow you to absorb knowledge.4. Make sure you understand the entire concept before offering any advice or suggestions to others. Sometimes people are so eager to show their enthusiasm that they offer suggestions without realizing the speaker would prefer that they listen rather than give advice. This is not to say that suggestions and solutions are not important. Of course they are, if they are offered at the appropriate time.5. Stop everything you are doing and give the speaker your undivided attention. It is nearly impossible to concentrate on what someone is saying if you are doing something else. You may be able to take in the gist of what it being said, but you will never absorb all the details. Details are the meat and potatoes of knowledge and should never be missed.Reading Skills1. When you read a paragraph make sure you can repeat the meaning of that paragraph before you read any further. It is natural for your mind to wander as you are reading a training manual or other reading material. But you need to train yourself to read and understand every paragraph before you move o
The selling dealer should make certain that vehicle receivables and customer accounts, other than service and parts, are pure. Necessary adjustments and write-offs should be made, with the purpose of arriving at a receivable figure which realistically depicts the amount of cash which can be expected.
If the dealership's service and parts policy has been well monitored, these accounts should pay in an orderly manner. In addition, the dealer should decide whether collections should be performed by dealer, and one or more employees, or whether the dealer can sell the accounts to a factoring house.
17. Leased Equipment
Not all leases can be cancelled. The dealer should determine which, if any, of the leases have personal guarantees, and with respect to such leases, make a concerted effort to negotiate a settlement with the lessor. That assumes that the corporation is insolvent. If the corporation is solvent, than settlements need to be negotiated with respect to corporate leases.
18. EPA Inspection
If the real property is owned by the closing dealer, it is important for the dealer to determine where and what the problems are likely to be. If underground gas or oil storage tanks have ever been located on the dealership real property, the dealer should, if not already available, contact a private inspection agency and obtain a certificate of clearance, or compliance, with respect to it.
Be aware, no agreements between the parties can modify, or redistribute their respective liabilities, with respect to state and federal laws.
19. Expenses of Transaction
There are certain extraordinary expenses, such as real estate appraisal fees, consultant fees, attorney and accounting fees, which are incidental to the preparing a dealership for closing. These expenses will be paid both from the dealership general account and directly from the closing dealer's personal account. The dealer should alert the bookkeeper to maintain a separate journal, in which to record these expenses, in order that the accountants may readily determine the costs of sale and categories of expenditures, for income tax purposes, both personal and business.
Closing Date
Absent exigent circumstances, the dealer should estimate the amount of time necessary to prepare the store for closing, usually approximately thirty days. If possible, the closing should be on a payday.
The Comptroller’s Responsibilities
The Dealer's comptroller should prepare, or be responsible for the preparation of, the following items and documents, for transfer:
The Books & Records;
All Purchase Orders and Deposits;
The Franchise Termination Letter and the Factory's, or Distributor's Acceptance of the Buyer's Resignation;
The Accounts Receivable List;
Prepaid Expenses;
Preparing a Leased Equipment Inventory;
Securing Old Credit card plates and Machines;
The Parts and Accessories Return, Vehicle Return, and Rent Assistance Demand Letters;
The Transfer and/or cancellation of various: Telephone Numbers; Post Office Boxes;
The insurance arrangements: life, garage keeper's tail, real and personal property, health, etc.
The Dealer’s Responsibilities
The Dealer should prepare, or be responsible for reviewing and supervising all of the items in the checklist and for the preparation of the following items:
Decide on the employees that are required to stay in order to complete the closing of the store.
Check for sold orders decide whether to deliver, cancel, or refer to another dealer.
Cancel company credit cards, including any phone credit cards and any mobile phones - except your own.
Secure telephone service. Set a Voice Mail message regarding a dealership referral.
DETERMINE THE FACTORY'S OBLIGATIONS WITH RESPECT TO ITS RIGHTS TO LEASE AND PURCHASE. BE SURE TO MAKE CLAIMS AND REQUESTS FOR ASSISTANCE WITHIN THE TIME PERIOD SPECIFIED IN THE SALES AND SERVICE AGREEMENT.
If necessary, talk to a Realtor and list the facility on the market (lease or sale).
Find out where credit card monies are deposited and move the account if it is in the same bank where the company's general account resides.
Close out, or transfer to another dealer all active service ROs. If possible, negotiate a referral fee.
Create a press release for store closing.
Cancel all new vehicle orders that are not scheduled, do not order any new cars.
Close out all service ROs so that work is completed by date of close. Do not accept any work that can't be completed by store shutdown date.
As always, when closing a dealership, you should always consult with a qualified attorney and accountant.
For additional information on this and other automobile dealership subject matters, go to: http://EzineArticles.com/?expert=John_Pico
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