G&A or Z Account

[sallen1]

"Typically G&A expenses are usually minimal in relation to total expenses"

I sense the debate here is how you measure your department's profitability. If things are piled into G&A you are getting false performance from your departments. But if you are paid on profit before G&A then of course, push as much over there as possible!

Finally, if there are boats, airplanes, vacation homes, etc. buried in your statement then you have different issues than accounting.

s

[JustBob]

If I many intrude, I am the moderator for the AutoSoft Forum but read all the DealersEdge Forums daily to expand my horizons.

I seem to recall the General strongly recommending the dealer move away from G&A accounts a few years ago and also got away from the A,B, D,E, F & Z designations. Old habits die hard so I still call them Z accounts. The problem with an entry to a Z account is that it remains in the Z account and is distributed only on the monthly FACTS statement and perhaps some other reports. Typically the detail is not available to the department manager, just one total dollar amount with no additional information. This makes it a good place to bury the dealers or his sons trip to Sturgis or Daytona Beach and allow the departments to share in the expense (that is an editorial comment). In addition all the dollars in say 061Z are distributed to the departments by a stated percentage. The better solution is to use a distribution account within your DMS software.

A distribution account allows each expense to be in prescribed but varying percentages.

A couple of examples:

1.You might distribute the electric bill 20% to each department but the water bill 30% new, 30% used and the remaining 40% among the other departments.
2.Coffee might be distributed equally to all departments but the cost of a case of TP distributed 48% new, 48% used and the remaining 4% divided among parts, service, and body shop.
3.You could vary this distribution monthly (or daily) if so desired but this would indicate a bean counter with too much time on their hands.

If properly inputted by accounting the departments could see the detail of what makes up their expenses. Accounting can still charge an expense totally to one department such as shop towels. Of course this would allow the department manager to see their expense detail and attempt to monitor and control them.

I know the DMS I distribute allows this as do the 2 big guys and am pretty certain all the smaller DMS vendors have this ability also. Once configured it actually saves accounting from wasting their the time to divide it our manually and provides a complete trail of where the money is being spent.
Hopefully my explanation is correct and helpful.

Have a tremendous day
JustBob

[capsgs]

Ok the reason I started this whole deal is because my G&A expense is usually equal to or greater than my entire dept expense. When I look at the Comapass Report we are at least 5-20% under in all expenses compared to 50 better dealers until I get to G&A then we shoot to 25% above. This is the only dealership I have ever worked at, and it's been 30 yrs. Financial information was always a hush hush deal until recently. I'm just trying to see what's normal.

[bosslady]

I concur with Sallen...As a Controller and Business Manager for 30 years..my experience has been to avoid the Z accounts whenever possible and charge expense directly to the departments..that way your managers have the ability to control/discuss/question what they are paying for..otherwise, how can you hold your department heads accountable for what is spent?? If you don't get a departmental profitability report daily or at least weekly...the managers are always looking backwards instead of dealing with expenses/charges as they occur. Just my 2cents..I believe in accountability at all levels.

[texaslp]

Okay now I have a better understanding now what you guys mean by Z account. We don't use Z, but we do use an account that distributes overhead by % to the depts. What I meant by "ridiculous" is that's impossible to expense every little thing exactly to the dept's.
There are a lot of overhead type of expenses that are charged as a % and the dept mgr really has no control/say so over, whether you put them in z or not. (we don't use z at all so I'm not supporting z) But the bottom line is still the same.

To the original poster-it sounds like your dealership is using the old method of allocating overhead expenses. So all you see is a big lump sum of total overhead rather than overhead being distributed out to the individual expense accounts. So for example in your dept under office supplies you will only see items bought specifically for your dept. The Z account will include some % of office supplies that are purchased for general use(ie copy paper).

Seems like the dealer would rather have a better idea of each individual expense category rather than a big lump sum of overhead.