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4 Common Auto Dealership Payables Inefficiencies and How to Solve Them

“Efficiency, which is doing things right, is irrelevant until you work on the right things.”

This quote by management expert Peter Drucker is something to consider as you assess the functions of your auto dealership’s accounts payables (AP) department and decide how they might be improved. Chances are, you will find operations bringing limited value to your cash flow and processes that hinder your vendor relationships.

One of the best ways to mitigate your accounting problems is to find an AP automation solution capable of speeding up and improving the accuracy of your employees’ tasks. From this pivot point, your team can take steps toward reversing inefficiencies and focus more on the “right things.”

Top Accounts Payable Inefficiencies

1. Making vendor payments with a single, personal credit card.

Problem #1: Paying by personal credit card slows down the payment process. Manually paying vendors using a credit card each time a payment is due, although more convenient than issuing checks, takes a significant amount of time. There’s no reason to do this manually when an automated payables solution, such as what REPAY offers, can speed the process up by eliminating repetitive data entry. Not only that but paying vendors using managed payables software is much safer since information is stored securely in a PCI-compliant environment.  

Problem #2: Using your personal credit card to complete purchase transactions exposes your organization to risk. Sharing your card information increases the possibility of fraud significantly because with so many people processing your payments, there is potential for your card information to get stolen or misused by third parties. Additionally, vendors who store your card information in an unsafe online environment may inadvertently expose it to hackers–or in worst case circumstances–commit fraud themselves. As you pay your vendors online, you could unknowingly be directed to a fake website and fall victim to phishing scams.

Problem #3: You can’t take advantage of cash rebates. A corporate credit card may earn your organization (and leadership) benefits. Still, virtual card rewards often far exceed those corporate credit card rewards. With corporate credit cards, the card owner may accumulate mileage points of 1 to 2 points per dollar spent, in addition to fringe benefits like restaurant savings and in-flight snacks. With virtual credit cards, settlement is instantaneous, and the reward paid back to your dealership is typically 1 to 1.5% of each transaction’s value. These rebates can give you a sizable return over time and help strengthen relationships with vendors who gain the advantage of receiving timely payments. Not to mention a significant improvement in card security and realtime reconciliation due to the instant settlement.

The Solution: Fully automate your payment processes with an integrated payables software solution. An automated vendor payables solution will combine all vendor payments into one payment flow and centralize the dealership’s data and payment execution. Once you automate payment processes, you eliminate manual data entry and gain tools to help your team monitor for double payments, exceptions and fraud. Choosing a PCI-compliant solution will mitigate risk because card information can’t fall victim to data breaches, identity theft and fraud. As a bonus, you can gain valuable cash back through virtual card rebates.

2. Cutting large numbers of paper check payments.

Problem #1: Paper check processing is expensive. The cost of running a single check is on average $3 to $6, but that’s not considering additional inputs like materials, postage and employee salaries. Bank of America reported in 2016 that the overall cost of issuing a check ranged between $4 to $20 per transaction.

Problem #2: The potential for fraud increases significantly. A 2019 American Bankers Association (ABA) report found that check fraud accounts for 60% of attempted theft aimed at deposit accounts, with counterfeit checks and forged signatures being the most common activities. It’s also important to note that sending paper checks by mail heightens the risk of fraud. If your accounting staff reconciles accounts manually, it could be long before any criminal activity is realized.

Problem #3: Manual processes leading up to reconciliation are time-consuming. When auto dealerships pay vendors by check, it’s not uncommon for staff to call vendors frequently and confirm that payments have been received and processed. This stalls account reconciliation in a dealership’s dealer management system (DMS) and makes regular account analysis, cash flow analysis and forecasting much more difficult.

Problem #4: Visibility of transactions is limited. A department cutting high numbers of paper checks can’t give timely feedback on payment status like it would if all payments were made in a digital format. This limits the ability to oversee account settlements and complete accurate forecasting.

The Solution: Reduce the time and money invested in check payments by automating the payment process. Automating payments through payables software allows your dealership to pay vendors by virtual card payment, ACH transaction or check, all from a single payment file online. When you pay a vendor through an integrated payables solution, your check payments are automatically reconciled, saving you and your team time from chasing each check down. Payables solutions combine with AP automation software to form an end-to-end accounts payable solution for your dealership, from invoice capture to settlement and reconciliation.

3. Using a non-centralized AP department for multiple locations

Problem #1: Different business rules, workflows and processes at your dealership’s locations create a lot of confusion. Without standardization, employees can’t manage work outside their immediate departments, which inhibits the cross-utilization of skills, discourages teamwork and deters expansion.

Problem #2: There’s no control over AP processes. Essential tasks like processing invoices and paying vendors may be inconsistent across locations, so it’s possible that the same vendor may be getting paid on time from one location, not from the other. These inconsistencies can make working with vendors difficult and result in lost business.

Problem #3: Visibility of key metrics is limited across locations. When settlements and reconciliations vary, there’s no way your dealership can, from day to day, determine overall cash flow or forecast accurately. This makes expansion planning and working with lenders more difficult.

Solution: Implement an end-to-end AP automation software solution to synchronize data across all locations. Software with realtime data capture gives financial managers instant visibility across locations, and administrators can set workflows, approvals and sign-off rules plus assign general ledger (GL) coding by location.

4. Adopting non-DMS-integrated accounting solutions.

Problem #1: Non-integrated solutions still require manual labor. The capabilities of AP automation software for dealerships vary widely depending on whether or not you’re using a solution that integrates with your DMS. If yours doesn’t integrate, you can capture data and manage invoices, workflows and approvals, but you’ll still have to process payments and reconcile accounts manually.

Problem #2: Non-integrated solutions introduce more room for error. Because of the manual processes involved in making payments, posting payments to your DMS and completing reconciliation, you’ll have a higher margin of error than you would with an end-to-end AP automation solution. Catching unauthorized payments, double payments and fraudulent activity will also be challenging.

Problem #3: Scaling your dealership will be more difficult. Without an end-to-end automation solution to tie dealership locations together, different business rules, workflows and processes often govern a multi-location operation, causing differences in data processing and vendor payment activities. This can result in higher operating costs and unnecessary duplication of paperwork. As your dealership grows, you will likely need to hire more accounting staff to process the additional invoices and manual workload associated with new locations.

Solution: Find an AP automation solution that works with your DMS. Your accounting processes must be seamless to take full advantage of automation capabilities. Look for an integration that offers:

  • Realtime data capture across locations
  • Centralized control of workflows, approvals, sign-off rules and GL coding by location
  • Process scalability across locations
  • Centralized storage capacity of all invoices and documents


Improving Accounts Payable Transactions: AP Automation and Integrated Payables Solutions

Now that you know what keeps AP staff in a continuous struggle over time and resources, you can begin looking for software solutions that fit your dealership’s most pressing needs. Look for an end-to-end AP automation software like APSmart by CloudX that can configure your business’s unique workflows while also giving you complete visibility of your AP processes.

In addition, look for an integrated payables solution. It’s a vital payment add-on to help you combine your vendor payments into a single file, centralize your payment execution and gain monthly cash rebates on eligible purchases. By incorporating this software into your automation package, you’ll achieve end-to-end processing that eliminates paper, increases accuracy and frees up your accounting staff for other vital tasks.

Get your auto dealership on its way to efficiency today, and contact CloudX for a free demo.

Did You Know?

  • Invoice processing with minimal automation costs an average of $10.89 per invoice. (Ardent Partners, 2021)
  • Implementing an automated payment solution can reduce processing cycles by 73% and reduce processing costs by 81%. (Business Insider, 2021)
  • Virtual credit card transaction activity reached $1.9 trillion in 2021 and is expected to reach $6.8 trillion in 2026. (Juniper Research, 2021)
  • Approximately 73% of organizations have plans to transition their B2B payments from checks to electronic payments from 2022 to 2023. (Association for Financial Professionals, 2022)
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