Car Dealer Insider Oct 15, 2006
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Car Dealer Insider Oct 15, 2006

Tips for managing dealership cash flow

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Tips for managing dealership cash flow

There's an old joke about accountants: A car dealer is interested in hiring a new controller. He sets up interviews with three candidates.

The first applicant arrives and the dealer says he has only one question: "If I have three dollars of revenue and two dollars of expense, how much profit have I made?" The candidate quickly responds, "You made one dollar profit." The dealer says thanks for your time and sends the guy on his way.

The second candidate gets the same question. He looks at his worksheet, then looks at the dealer. A light seems to go on over his head and he says, "Three dollars in revenue and two dollars in expenses. Mr. Dealer, you've made two dollars profit." Candidate number two gets sent packing.

The third applicant hears the question, looks at his worksheet, looks at the dealer and then smiles. The applicant says, "Three dollars revenue and two dollars expense - how much profit would you like to make?" Candidate number three gets hired on the spot.

Now here's a question that should take you back to your introductory Economics or Business Management courses: "What is the purpose of a business enterprise?"

Anyone who answered, "to maximize profits" should go to the back of the class for a while, or, better yet, talk to your accountant.

The real purpose of a business is "to maximize cash flow." Profit is just a creation of the accountants and should not be confused... (252 of 1006 words)

Also in this Issue:

  • An update on dealership valuations (241 words)
  • Five things to keep out of an employee handbook (618 words)
  • Increasing vehicle turnover: Days-supply-units vs. Days-supply-dollars (720 words)
  • New ideas (283 words)
  • Trend spotting (209 words)