Auto Dealer Inventory Audit Checklist

Proper inventory management is critical for any auto dealership group's success. After all, the dealership's inventory of vehicles and parts is its lifeblood. However, true "management" requires actively monitoring inventory levels and turnover to meet business objectives.

Relying solely on a floorplan audit is insufficient.

Dealerships cannot afford unhappy customers who come in to buy a vehicle advertised online, only to find out it is not actually in stock after spending time travelling or waiting in the showroom.

Likewise, dealer lots cluttered with ageing inventory can create substantial losses. To avoid such problems, dealerships need robust inventory control procedures, with physical inventory counts and reconciliations as a cornerstone.

Benefits of an Inventory Audit

While external financial or lender audits may be mandatory, dealerships can gain major advantages from internal inventory audits as well.

Internal audits help ensure compliance with regulations and assess policies around risk management and finances. Importantly, they also evaluate operational effectiveness, pinpointing areas for business process improvements.

For automotive dealers in particular, inventory audits are critical for accurate accounting of floorplan assets. This reduces lending risks, speeds up cashflow when units sell, and provides confidence in the quantity and status of inventory.

A comprehensive stock audit compares physical inventory against stock records, revealing any discrepancies. This serves several key purposes:

• Catch stock-taking errors, loss, damage, or theft early
• Verify inventory accuracy and data entry quality
• Confirm stock is properly secured and compliant
• Identify inconsistencies between departments
• Spotlight best practices to apply across a dealer group
• Enable data-driven decisions on inventory
• Facilitate proactive stock management
• Reduce fraud risks
• Boost operational efficiency by identifying issues
• Produce accurate accounting for cash flow, VAT, commissions, etc.
• Allow management to focus on addressing anomalies

Key Considerations When Preparing for an Audit

Conducting an effective automotive dealership inventory audit requires careful preparation and planning. Here are some key areas to address:

Audit Planning Checklist

A successful inventory audit requires careful preparation:

1. Pre-Count Planning

• Set count timeline in advance, avoiding busy sales times or customer disruptions. Schedule counts during slower periods but be wary of giving too much notice that might allow a fraudster time to cover their tracks.
• Assemble a trusted inventory count team, choosing people with attention to detail and diligence.
• Create detailed procedures and guidelines for the count process. Outline responsibilities and expected documentation.
• Print organized count forms and worksheets tailored to the dealership's needs. Prepare necessary supplies depending on your mechanism – if a manual count, supply clipboards and pens.
• Conduct training sessions to thoroughly explain procedures and expectations to staff. Emphasize accuracy and completeness.
• Organize your count by location to help to make the process more efficient and provide an orderly way for employees to conduct the inventory count. Create maps or diagrams indicating the counting areas.
• Assign employees to specific areas that they are responsible for counting. That helps manage the counting process and makes it easy to identify employees who may need to provide or clarify information after the count is finished.
• Hold pre-count meetings with team leaders to align on goals, procedures, timelines, and address questions.

2. Inventory Count

• Designate a person to demonstrate the process on the day of the count to ensure employees understand what they are doing and how the process works. Make sure everyone receives examples of the documentation method you use as a guide for them to follow.
• Count vehicles methodically zone by zone.
• Record VIN, parking spot, odometer reading, and vehicle condition for each unit. Note details on damage or issues.

3. Reconciliation

• The independent reconciler should investigate all discrepancies from the physical count.
• Verify reasons for missing units like recently sold or in service. Follow up if uncertain.
• Identify any unrecorded assets present on the lot.

4. Reporting

• Analyze results to spot trends, recurring issues, and areas for improvement.
• Broadly share high level findings and invite feedback from all staff.
• Enter complete results into dealer management systems to update records.
• Research root causes of any significant count variances and verify as needed.
• Assess what worked well and what needs refinement in the count process itself.
• Present final inventory status to executives and archive documentation.

5. Action

• Adjust inventory systems and financial records to reflect audit findings.
• Review processes and address vulnerabilities that contributed to discrepancies.
• Recognize and reward teams that showed excellent accuracy.
• Constructively critique teams with significant gaps and solicit their input on fixes.

Leverage Technology

In today’s fast-paced business environment, dealers cannot afford to waste time and resources on outdated inventory audit procedures. Manual counts with a pencil and clipboard are time-consuming and prone to errors, leading to inaccurate inventory records and lost sales opportunities.

Dealers need a better solution that leverages technology to streamline the inventory audit process. With the right tools, dealers can easily assemble a count list, track the real-time physical lot location of vehicles, and ensure accurate inventory records.

LotCount offers a comprehensive solution for dealers looking to improve their inventory audit procedures. With LotCount, dealers can leverage the latest technology to ensure quick and efficient inventory audits.

Learn more about LotCount and start your journey towards fast, simple and effective inventory auditing today.