Since 2008, the automotive industry has been more like the television show "Survivor" than anything else. Various challenges were presented to dealerships: cost cutting, keeping up employee morale, and managing the factory and its expectations in order to avoid having your franchise terminated. The problem is there was no such thing as an "immunity idol" for protection. Stores which have been in existence for decades were closed down as factories re-aligned dealerships, cutting locations to become better positioned for their own survival.

In order to emerge victorious there were tough decisions to make, such as reducing employee wages and/or headcount, figuring out which expense items could be renegotiated in order to preserve cash flow, securing financing for floorplan, and even refinancing the property the dealership is located on. It has been a trying time, and the dealerships that made it still have one question to answer: what if this turns into the "double-dip" recession which some experts fear? What expenses are left to cut or renegotiate? This is the time to get back to dealership fundamentals: cash flow management.

Cash flow is a daily battle for dealerships. Contracts need to be collected on a timely basis and customer accounts receivable need to be pursued diligently. Having effective programs in place in order to identify problem contracts and receivables will help to resolve issues quickly, before a small problem turns into a very big problem. Collecting contracts and customer receivables are essential in order for the dealership to pay the notes on vehicles, and to purchase new vehicles for retail. Delays in the collection process could spiral out of control, and the dealership could be out-of-trust before anyone realizes it.

Typically contracts should be collected within 10 days of the vehicle sales — the quicker they are collected, the better. Customer receivables are a different animal, as oftentimes there are post dated checks involved (and, unfortunately, the occasional bounced check), as well as various other delays in the collection of these receivables. For these reasons, it is a bit harder to identify which customer receivables are problematic rather than identifying the problem contracts, but if the accounts are reviewed in detail regularly (weekly or even daily, depending on the size of the dealership), this process becomes much easier.

In an economy which is trying to hold off a second recession, it is that much more important to get back to the fundamentals of business. Cash is king for a reason — without it, inventory can't be purchased, bills can't be paid, and neither can employees. Contracts-in-transit and accounts receivable are good things to have — it means you are making deals — but converting them into cash is even better.