Floor Plan Inventory Accounting

Contrary to common perceptions most car dealers do not pay cash for the.

Floor plan inventory accounting.

Floor planning is commonly used in new and used car dealerships. A longer turn time for inventory eats into cash flow. Also if inventory financed by a floor plan loan is moving slower than expected the lender may ask for payment from the dealer for interest and possible depreciation of its collateral. These floor plan finance formulas incorporated with your turn time can help to make or break your dealership s profitability.

The arrangement is most commonly used when large assets such as automobiles or household appliances are involved. This article reviews how you can manage floor plan financing with quickbooks. Retail floor planning also referred to as floorplanning or inventory financing is a type of short term loan used by retailers to purchase high cost inventory such as automobiles these loans are often secured by the inventory purchased as collateral. The holding cost per unit per day is a useful metric that can help you keep your inventory balanced as well as determine how quickly you might need to turn a unit.

Retailers use a short term loan to purchase inventory items and the loan is repaid as inventory is sold. With floor plan financing you will work with a third party financing institution a floor plan financing company to. A floor plan is a method that a business such as an auto dealership can use to finance inventory that they are holding for resale without having to tie up their own capital in that inventory.