Pitcher Partners outlines EOFY action plan for dealerships
As end of year approaches, Pitcher Partners has reminded dealerships to make sure they have adequate tax planning measures in place to avoid cash flow strife.
Pitcher Partners has advised dealerships to conduct a financial ‘spring clean’ in preparation for the end of the financial year to ensure they’re prepared to meet their tax responsibilities.
“Most dealers know that tax is one of their largest expenses, however if tax planning is not done properly, there could be severe cash flow consequences as well, especially this financial year,” Pitcher Partners said.
“Profits have been plummeting, stock values have been normalising, so managing your tax deferrals and tax liabilities will be key for 2025.”
As part of an end of financial year ‘spring clean,’ Pitcher Partners recommended dealership financial teams to reconcile all of their scheduled accounts. This would include clearing up unmatched entries, debit amounts related to vehicles incorrectly stocked in, and writing off additional costs or losses from sales transactions.
Dealerships should also review all accruals and prepayments accounts and schedules for errors and ensure they comply with the dealership’s accounting policies, Pitcher Partners said.
They also reminded firms to review relevant tax legislation and explore ways to keep their tax bill down.
Pitcher Partners reminded dealerships of the different methods which could be used to value their trading stock - cost, replacement value and market value. Demonstrator vehicles would require an independent valuation, while used vehicles could use an independent valuation or published industry guide.
They reiterated that independent valuations must be truly independent, and the valuer cannot be an associate of the dealer.
Pitcher Partners added that dealers could sometimes make tax deductions on obsolete spare parts. Otherwise, the obsolete stock should be returned to the manufacturer for a credit or scrapped.
A successful tax deduction would require a parts stock report of realizable value at year-end, the stock identified to be less marketable due to changed circumstances, and for the true reflection of the dealership’s taxable income to not be achieved if the stock was valued at cost, Pitcher Partners said.
To avoid unwanted surprises, it reminded dealerships to perform tax estimate calculations and prepare a cash flow projection to ensure the owners could meet end of year tax obligations.
Pitcher Partners added that firms should maintain a tax-effective commercial distribution strategy, best done with a tax advisor well in advance of the end of the financial year.
“Whether you’re planning for refinancing, a sale, an acquisition, or other significant capital investments, getting your numbers right is crucial for success,” it said.
