Vehicle rebates are a selling tool car dealerships and manufacturers use to drive more business, even when most consumers are paying above sticker price on vehicles. Since rebates are not discounts or coupons, dealerships receive the funds from the rebate after the vehicle has been purchased from the manufacturer and sold to a consumer.
This means accounting teams at the dealership must make adjustments once the rebate is received. When rebates are not paid for promptly, it can create over-aged accounts receivables. So how can a dealership’s accounting team deal with outstanding rebates?
Rebates have long been a part of the auto sales supply chain. Manufacturers use them to encourage increased sales of their vehicles, create a sales boost, and move products that may be going “stale” with new models and technology coming out.
Typically speaking, the rebates fall into one of two categories:
While waiting for payment on an item, that payment usually is considered an accounts receivable item. The accounting team cannot use the rebate amount to discount the cost of goods sold until payment has been received.
If the manufacturer hasn’t paid the rebate because they have a backlog of requests, paperwork was lost, or myriad other reasons, the item can become over-aged and must be reconciled to satisfy the dealership’s accounting and reporting requirements.
Dealerships should consider the following questions when dealing with over-aged rebate receivables:
Dealerships should also consider how over-aged rebates will affect the data presented on the income statement and balance sheet.
Reviewing these questions with the accounting team and management team and a trusted accounting professional can help shape policies that will help keep accounting records up-to-date with current rules and regulations.
Please contact Keith Laudenberger via our online contact form for more information.
Councilor, Buchanan & Mitchell (CBM) is a professional services firm delivering tax, accounting and business advisory expertise throughout the Mid-Atlantic region from offices in Bethesda, MD and Washington, DC.