BHPH Solutions


BHPH Solutions

Discuss solutions for dealers getting into BHPH or thinking about it.

Location: Crystal Lake, ILL
Members: 129
Latest Activity: Sep 16

Discussion Forum

Using SMS Text Messages for Collections

Started by Dominic McWhorter Aug 23, 2012. 0 Replies

Best practices: collections

Started by Rob Hagen. Last reply by Frank Dec 8, 2011. 7 Replies

How many collectors should we have per # of customers?

Started by Mike "BK" Anthony. Last reply by Brad Sutterfield Apr 29, 2011. 4 Replies

Comment Wall


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Comment by nathan king, cpa on December 7, 2013 at 8:23am

If by " he records a sale as cost of the unit minus the downpayment" you mean dealer cost minus downpmt and not actual sales price minus downpmt from the customer then that is very weird and very wrong.

Also, if you aren't the dealer or an accountant then what type of client business are you trying to get out of him--general dealer operations consulting?-- because he needs some serious help all around. What database software does he use or is he strictly self-composed excel spreadsheets?

Comment by Dugan Anderson on December 6, 2013 at 9:38pm

I have recommended to him he should have a separate Finance Division, discount the contracts to the Finance Company, take the gross in the car company and let the Finance Co. deal with the receivables.

Comment by Dugan Anderson on December 6, 2013 at 9:36pm

First of all, this in not my operation and not my accountant, this is a potential client of mine.  As for the way he accounts for a sale, he records a sale as cost of the unit minus the downpayment (cash in, cash out).  The selling price, contract amount and all other details are not considered.  As payments are made, cash is shown as "Cash In".

Comment by nathan king, cpa on December 6, 2013 at 9:29pm

I'm not sure I understand your description of what your accountant is doing..."he uses inventory cost less down payment to determine gross (which is almost always negative). "

That doesn't make sense since the full selling price is gross sales and the downpmt is irrelevant as to the income for book or taxes. Whether you finance 100% of the selling price or require a downpayment, neither the book nor the taxable income to the dealer is affected, only his cashflow is different.

Comment by nathan king, cpa on December 6, 2013 at 9:21pm

For inventory purposes accrual just means you buy a car in December at auction for 5,000 and put 700 into it to be lot ready. At December 31 since it isn't sold, that 5,700 is on the balance sheet as inventory rather than expensing the 2 cost components of that car immediately. When the car eventually sells, then that 5,700 offsets the selling price as a cost of sales to get the gross profit on the sale--assuming no other costs are involved for this example. As for collections, a finance co separately organized can certainly book and record pmts as received which is cash basis. That way if a customer has defaulted for 2 months you aren't still taxed on unreceived interest income (like you would be on the accrual basis). The problem is you really shouldn't be using both methods inside of one entity. In MA, where I am, it's illegal for a dealership to write and service its own paper which is why dealers have to set up rfcs as non-depository banks with the Div of Banking. Apparently in whatever state you live that's not an issue.

However, by not having separate entities you lose the opportunity to discount the sale of those notes between the dealer and the rfc at FMV and deduct it for taxes immediately which is what Gene is talking about when he mentioned leaving money on the table for taxes.

Comment by Dugan Anderson on December 6, 2013 at 8:58pm

Thanks Nathan for your comment.  Not being an accountant, I am not sure what inventory being a material part of the income calculation means, but I can tell you he uses inventory cost less down payment to determine gross (which is almost always negative).  He books and records payments as they are received.  I think he could be in violation of several statutes.  Your thoughts?

Comment by nathan king, cpa on December 5, 2013 at 9:34pm

For taxes if inventory is a material part of the income calculation then accrual is required. Dealers have to be accrual unless somehow all their cars are on consignment to them which would be odd.

Comment by Gene Daughtry @ on December 5, 2013 at 11:33am

Hey Dugan, 

Great to hear from you. I have not worked with a dealer in BHPH that used the Cash Basis for accounting. I am not sure why they would do that. They should have an RFC and assign the loans to that company once the contracts are complete. Their accounting should resemble a retail dealership, sales transactions and indirect funding from a bank with a loan discount. You are right to be skeptical in my humble opinion. It may be easier for the accountant to maintain the books but the books are inaccurate and money is being left on the table from the tax advantages.

Comment by Dugan Anderson on December 5, 2013 at 11:24am

Gene, I have a question for you.  I have a prospective BHPH client who does not have a separate Finance Company.  Further, he runs his accounting using the "Cash" basis which has been blessed by his accountant.

I am very skeptical about this advice.  All my other clients have a Finance Company.  My thoughts are once you enter into a "contract" with your customers, Cash Basis is out the window.  Your thoughts?


Comment by Gene Daughtry @ on February 16, 2013 at 11:52am

A few years ago I was on a Best Practices Panel in Dallas with other dealers in BHPH. We discussed how each of our operations were set up and how we handled our daily challenges. One dealer on the panel who has been in the business for decades having multiple locations shared with me the most important lesson he had learned during those years. "Get into a 20 Group". This very successful dealer said it was the best thing he had ever done for his business. 

NCM Associates have been in the 20 Group business since 1945. NCM specializes in group moderation and training for all types of operations in and out of the automobile industry. If you would like to improve your business, keep up with everything that effects what you do and fellowship with your peers, join a 20 Group and follow the lead of thousands of other dealers across America.

Go to to get started. There are BHPH/LHPH and independent groups and new groups getting started right now.


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