Monthly reconciliations are an important part of any well-managed parts department and ensure that your books and records are properly balanced throughout the year. While it can be time-consuming, monthly reconciliations are incredibly beneficial to your dealership. 

Not only does it help minimize preventable errors, which means less time will be spent analyzing and correcting your books, it can also be an effective tool for determining whether your employees are following accounting best practices and will ensure they are not taking shortcuts. 

It will also help you determine whether your administrative staff are properly equipped and trained to be managing your books. If not, you can take the necessary steps to ensure that they are.

Perhaps the most important reason to reconcile your parts accounts monthly is to pinpoint any large discrepancies to that particular month.

To help ensure you are correctly reconciling your inventory, Pro Count West has created four steps to follow.

1 - Assume Your Physical Accounts are Accurate

While this goes against everything you think you know about inventory, when conducting a monthly reconciliation, you do not physically count your stock. It’s not uncommon for there to be discrepancies between your inventory general ledger (G/L) and sub-ledgers. Human errors happen, and you want to catch and correct them in a timely fashion. If you perform regular cycle counts throughout the month, and look at your inventory balance daily to make sure there are no big jumps in either direction, it should be a safe figure to go with.

2 - Compare Your Ledgers to Your Documentation

Gather your reconciling documents, such as parts received and not billed, parts billed and not received, pending credits, open repair orders and counter tickets, etc. and compare these to your ledgers. Keep in mind when you are reconciling these figures, the cutoff is the most important part of the process. If you have turned invoices in to be posted, make sure they have been posted, otherwise they need to stay on the parts side of the reconciliation.

3 - Identify and Source Discrepancies

If a discrepancy exists between your G/L and sub-ledgers, you will want to proceed with analyzing your accounts to determine the sources of the differences. There are a variety of errors that can occur but the most common are:

• Mathematical Errors – incorrectly calculated an amount.
• Errors of Omission – missing invoices or credits.
• Transposition Errors – inputting $780 instead of $870.
• Double Entries – invoices, credits or adjustments made multiple times.
• Incorrect Accounts – entry was made into the wrong account.
• Improper cutoff - if you see large swings back and forth each month, you are probably not timing the cutoff correctly.

4 - Adjust

With the exception of tires and GOG accounts, we don’t recommend making any adjustments to the GL until your physical inventory. The reason for this is because if you have posted something to your inventory incorrectly, it will be reflected incorrectly on the reconciliation.

If you feel that you do not have the resources to complete these reconciliations, consider hiring a third party. They will act as an unbiased reconciler, offering transparency and minimizing disruptions within the administrative department.

At Pro Count West, we have the knowledge and experience to efficiently reconcile your books and quickly identify the sources of your discrepancies. If you would like to have us perform a reconciliation of your inventory accounts, contact us today!