A car for every lifestyle

As we go through different stages in our lives our car needs change. In my early twenties my needs were very simple. It was me, myself and I living a lifestyle that allowed, even encouraged, driving two door coupes. I worked my way through a number of coupes, such as an 88 Shelby Daytona, 91 Honda Civic SI Hatchback, 89 Toyota Celica GT, and 2006 Honda Civic SI to name a few. My philosophy was: I sit in the front, so what do I care about how much room is in the back seat? I will never be sitting there.

Now, in my early thirties, thoughts of family are on my brain, and again I find myself reassessing my car needs. I am still driving coupes, alternating between a 2009 Honda Civic SI and a 2004 Mazda RX8, although technically my RX8 is considered a four door, but I am starting to fear the impending change. In a desperate attempt to hold on to my youth I try to convince myself that I can make the coupe work with a family. This dream was recently shattered when I had to take my nephew, with car seat, out for the day. After this trip, I realized making it work was just a dream and once the family comes, I will not only be adding a couple of little ones, I will also be adding two extra car doors.

Car companies realize that people’s needs change early on, thus the invention of offering different models by the same manufacturer. The core idea is that within the same brand, a buyer is able to move up to different models depending on needs.

Buyers must also realize, as I have done, albeit reluctantly, that your vehicle needs change over time and these evolving needs need to be taken into consideration before making any purchases.

Based on my calculations, it will be 20+ years before it will be practical for me to own another coupe, but I am a car guy and often not very practical.

Diversify your investments

It takes so much capital to start, maintain and expand an auto dealership that there usually isn’t much cash left for other investments. I have heard many auto dealership owners tell me their retirement will be funded by the ultimate sale of their dealership business and property. “I make the best return on my money through my dealership business; therefore why invest in anything else?” While I like the passion and confidence these dealers express, I must admit that I am worried for their futures.

In light of the changes in the auto industry over the last ten years, I would recommend that every dealership owner have some of their money held outside their business. Many of the dealers that had their dealerships cancelled or retired over the past couple of years lost their current source of income and the nest egg they had been banking on for many, many years. Just as you wouldn’t put all your extra cash in a single stock, you shouldn’t have all your cash tied up in a single business venture.

It doesn’t take much to have a diversified portfolio. Contributing to your Registered Retirement Savings Plan as well as the Tax Free Savings Account and investing in stocks, bonds, mutual funds or other securities that are unrelated to the auto industry will give you a degree of diversification and lower risk in your investments.

With maximum annual RRSP contributions capped at $22,000 for 2011 and $5,000 per year for the TFSA’s you can easily see that your investments in these types of vehicles can grow substantially over time. Make the commitment to fund these types of investments annually, and more importantly work with someone who understands your concerns and risk tolerance so you’ll feel comfortable with the investing process.

What are you doing about fraud?

Eh, we’re Canadians aren’t we? We are an honest and polite country; so there is no way fraud is occurring at your auto dealership, right? Well, think again. I would suggest there is strong evidence that fraud is in fact occurring at your auto dealership. A study conducted by a major accounting firm and reported in the Financial Post suggests Canadian companies make great targets for fraud. In their latest global economic crime survey, Canada was the fourth most fraudulent nation in the world; behind Russia, South Africa and Kenya.

So what should you do and how can you best insulate your company to minimize the fraud risk?

Well, the first thing you need to do is recognize that fraud is a problem and accept that your auto-dealership is susceptible. This isn’t a case of admitting that you are paranoid, over reacting and in need of medical attention. It is a case of being prudent and honest with yourself and, most importantly, being vigilant in your oversight of the auto-dealership operations.

The next thing you need to do is identify the areas of your business that you think may be vulnerable to fraud and designing or tinkering with your current corporate organization structure to better insulate you and your company from fraud.

As an accountant I have witnessed various schemes and frauds in auto dealerships over the past 30 years. From relatively simple theft in the parts inventory and bogus warranty claims perpetrated by the service staff to the fraudulent refinancing of used cars and elaborate cheque washing schemes. It would appear that fraud is becoming more prevalent and more sophisticated. Know where your areas of risk are.

If you consider your parts inventory at risk, then make sure the stock room is in immaculate order and the perpetual accounting records tie into your general ledger. Initiating surprise physical counts a couple of times of year would not hurt and make your presence noted in the stock area; walk around talk to staff and consider installing surveillance cameras. However, I must warn you that installing elaborate surveillance systems is not always the answer. I believe when you resort to these measures you are admitting defeat. You may be better served by making a better effort at hiring and training your staff in the first place.

Consider requesting that all new staff provide you with permission to conduct a personal check; which would include a police criminal check. As well, make sure you set a good example and don’t blindly take parts inventory or any other item from the show and stock room without paying for it. I have heard many guilty employees comment, “If the owner takes stuff from the company, I guess it’s ok if I do it too!”

And lastly, make sure that you properly segregate the accounting duties of your employees. What does that mean? You should not permit one employee to make the daily deposits, prepare cheques, and access the company’s books and records. Don’t provide your employees easy access to perpetrate a fraud. Review the monthly bank reconciliations and at least review the sequential order of your bank return cheques to enable you to spot check the vendors and ensure the authenticity of the cheque signers. The steps are certainly no guarantee that you will be able to prevent fraud from occurring in your company but letting your employees know that you're constantly checking their work is a first step in preventing it in the first place. Also have a discussion with your bank manager about fraud. Most banks have programs that assist you in your fraud review.

The bottom line is that fraud is a fact of business life in Canada. Properly planning and consistently executing a plan to minimize the risks will not only bring peace of mind to you when you are sleeping at night or away on vacation, but it will also increase or maintain your company's profitability.