How to Improve Deal Closing and Cash Flow
For dealership accounting personnel, contracts in transit (CIT) represent both an opportunity and a potential bottleneck in the flow of revenue. Every deal closed on the sales floor is vital to the dealership’s profitability, but until the funds from these deals are fully collected, the dealership’s cash flow remains at risk. Managing contracts in transit efficiently is crucial for ensuring that deals are finalized and cash is collected on time. In this post, we’ll explore the key strategies and best practices for dealership accounting personnel to master the CIT process and improve cash flow.
What Are Contracts in Transit?
Contracts in transit refer to sales deals that have been completed by the sales department but are still in the process of being financed, funded, or finalized by the lender. While the vehicle may be delivered to the customer, the dealership has not yet received payment from the lender. Delays in this process can cause major disruptions in cash flow, which is why it’s critical for dealership accounting personnel to stay on top of contracts in transit.
The Impact of Delayed Contracts in Transit
When contracts in transit linger too long, they create several issues:
- Cash Flow Bottlenecks: The longer it takes to finalize a deal, the more cash flow is delayed. This can impact the dealership’s ability to pay bills, order inventory, or fund other operations.
- Increased Risk: Delays can lead to complications, such as customers changing their minds, banks rejecting financing, or mistakes in paperwork that further stall the process.
- Strain on Relationships: Prolonged CIT can strain relationships between the sales department, finance department, and lenders, causing friction internally and externally.
Best Practices for Managing Contracts in Transit
Implement a CIT Tracking System
The first step in mastering contracts in transit is having a clear tracking system. By using software tools that provide real-time visibility into the status of each deal, dealership accounting teams can see where deals are in the funding process, what paperwork is outstanding, and what actions need to be taken. A robust CIT tracking system allows you to:
- Monitor deal progress and flag delays.
- Send automated reminders to the responsible department or team member.
- Centralize communication between sales, finance, and accounting teams.
Ensure Timely and Accurate Paperwork
Many CIT delays stem from incomplete or incorrect paperwork. To prevent this, ensure that all necessary documentation is collected at the time of the sale. Sales staff should be well-trained in the specific paperwork required for each lender, and there should be clear guidelines in place for reviewing and submitting documents. Consider:
- Conducting regular training for sales and finance teams on proper documentation procedures.
- Establishing a checklist for each deal to ensure no documents are missed.
- Setting up a process for quickly correcting errors when they’re identified.
Foster Communication Across Departments
Effective communication between the sales floor, finance department, and accounting team is key to accelerating the CIT process. Miscommunication or a lack of coordination between these departments can lead to costly delays. Regular meetings or check-ins to discuss contracts in transit can help ensure that everyone is aligned and aware of what needs to be done to close deals. Some tips include:
- Setting up daily or weekly CIT status meetings between accounting, finance, and sales teams.
- Using a centralized platform where all teams can track and update the status of deals in real-time.
- Empowering accounting staff to communicate directly with lenders or finance companies to resolve issues quickly.
Build Strong Relationships with Lenders
Cultivating strong relationships with your lending partners is critical for smoothing out the CIT process. By building a rapport with lenders, dealership accounting personnel can often expedite funding, address issues more quickly, and ensure smoother deal closings. Strong relationships also provide the opportunity to:
- Preemptively address any lender-specific requirements or delays.
- Resolve issues through direct contact with the lender’s representatives.
- Gain insight into trends or potential obstacles with certain lenders.
Analyze and Adjust Your CIT Processes Regularly
To continuously improve your dealership’s contracts in transit process, it’s important to regularly analyze and adjust your approach. Keep an eye on key metrics such as the average time a contract stays in transit and the number of deals that encounter delays. By identifying bottlenecks and areas for improvement, you can make strategic adjustments to optimize the flow of deals and funds. Consider:
- Tracking key performance indicators (KPIs) related to CIT, such as average processing time and error rates.
- Conducting regular reviews of deals that faced significant delays to identify common issues.
- Implementing changes based on the insights gained from your analysis.
Contracts in Transit and Cash Flow Success
Mastering the contracts in transit process is essential for dealership accounting personnel who want to keep their dealership’s cash flow healthy and secure. By implementing effective tracking systems, ensuring timely paperwork, fostering cross-department communication, building strong relationships with lenders, and regularly analyzing your processes, you can minimize delays and ensure that your dealership collects cash for every deal on time.
