As the dust settles after tax season, it's an opportune time for multi-location auto dealership owners to pivot towards strategic growth and operational excellence. Below is a blueprint for post-tax season performance enhancement.
Understanding Tax Outcomes
Revenue Analysis
Effective revenue analysis requires the segmentation of departments to track growth trends accurately. By defining departments clearly, dealerships can align operational expenses with revenue streams. Key Performance Indicators (KPIs), such as units sold, gross profit margins on used vehicle sales, service revenue per customer, and customer satisfaction scores, are vital for monitoring performance.
Expense Review
Properly categorizing expenses within your system (DMS) ensures a consistent information source for KPI comparison. Benchmarking against industry standards or competitors can reveal inefficiencies or unexpected cost hikes.
Tax Strategy Assessment
Evaluating the long-term impact of tax planning strategies is essential. A well-considered tax strategy not only ensures sustainability but also provides a competitive edge by allowing investments in the dealership's future.
Identifying Tax Savings and Liabilities
Efficiency Gaps
Consistent tracking of KPIs against industry benchmarks helps identify areas where the dealership is either excelling or falling behind. This analysis can uncover operational inefficiencies outside of tax savings opportunities.
Investment Payoffs and Liability Lessons
Assessing the benefits of LIFO or exploring other inventory valuation methods can yield immediate tax savings. Dealerships should consider depreciation strategies, the potential for a cost segregation study to accelerate depreciation, and leveraging tax credits for fuel-efficient and energy-efficient practices.
Cost segregation studies are a tax planning tool used by real estate owners and investors to accelerate depreciation deductions, thereby reducing the amount of taxes owed in the short term. If you have made a property purchase or an improvement to your property, you may qualify for a cost segregation study to help identify tax savings.
Leveraging Tax Outcomes for Strategic Planning
Operational Enhancements
Maximizing the utility of your DMS can streamline processes and reduce errors. Empowering department heads to track KPIs and employing customer relationship software can address service and parts department shortfalls.
Financial Health
Proactive tax planning, including early consultation with specialized tax professionals, is crucial. Adjusting financial planning processes based on lessons learned during tax season can enhance financial health.
Action Plan for Implementation
Timeline
After KPI analysis, setting realistic goals is your next step. Engaging department heads in the planning and implementation process ensures responsibility and ownership, fostering a conducive environment for operational changes.
Metrics
Establishing and regularly reviewing success metrics against industry benchmarks or competitors' performance is essential for tracking progress.
Now is the Time for Strategic Growth and Operational Excellence
Using the post-tax season as a springboard for strategic growth and operational excellence is vital. Reflecting on the previous year's performance, setting a clear game plan, and focusing on achievable results are facilitated by good data and proactive planning.
Dealership owners should engage with their tax professionals to ensure that tax strategies are fully optimized. Discussing LIFO elections, depreciation methods, and eligibility for energy-efficient tax credits can unlock significant savings. By doing so, dealerships not only maximize their tax benefits but also set a strong foundation for strategic growth and operational improvements in the year ahead.
If you need further guidance or have any questions on this topic, we are here to help. Please do not hesitate to reach out to our Service Providers Industry Team to learn more. Additionally, feel free to connect with our experts, Steve Turner and Joe Fedele, today to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.