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While year-end planning often receives the most attention, a mid-year review provides the opportunity to address potential issues while there's still time to influence results. By evaluating key financial metrics now, dealership leaders can identify opportunities, address potential challenges, and make informed decisions as we begin the second half of the year.
Here are five financial areas every dealership should review before entering the second half of the year.
1. Budget vs. Actual: Are You on Track?
Mid-year is an excellent time to compare year-to-date results against the budget established at the beginning of the year. Ask questions such as: Are revenues, gross profits, and operating expenses tracking as expected? If not, what factors are contributing to the gaps?
Just as importantly, consider whether the assumptions behind your original budget still hold true. Changes in inventory availability, interest rates, consumer demand, or manufacturer programs can all affect performance. Updating forecasts now allows management to make informed decisions instead of waiting until year-end to react. A mid-year review also creates an opportunity to reallocate resources toward the areas of the business generating the strongest returns.
2. Are Your Margins Holding Up?
Sales volume only tells part of the story. The more important question is whether your dealership is maintaining healthy margins across the business.
Review trends in new and used vehicle gross profit, F&I income per retail unit, service gross profit, and parts margins. Even modest declines can have a meaningful impact on year-end profitability.
As you evaluate those trends, consider what's driving the change. Are lower margins the result of market conditions, such as increased pricing pressure or changing consumer demand? Or do they point to operational issues like inventory mix, pricing, or F&I performance? Comparing current results to your budget, prior-year performance, and 20 Group or ADBI benchmarks can help separate industry-wide trends from dealership-specific opportunities for improvement.
3. Is Your Inventory Working for You?
Although inventory should be monitored throughout the year, now is an ideal time to assess whether your inventory strategy still aligns with current market conditions. Consumer demand, interest rates, and pricing trends can shift, making assumptions from the beginning of the year outdated.
Review inventory turn, days' supply, aging reports, and floorplan interest costs to identify frozen capital tied up in slow-moving inventory. Pay particular attention to aging units that continue to consume floorplan expense without generating an adequate return.
Use this review to determine whether inventory levels, ordering patterns, and pricing strategies need to be adjusted for the second half of the year. Changes made now can help improve inventory efficiency and preserve margins through year-end.
4. Do You Have the Financial Flexibility for What's Ahead?
As you plan for the second half of the year, take a close look at your dealership's liquidity position. Capital needs can shift quickly as inventory fluctuates, facility projects move forward, or equipment and technology investments arise.
Review operating cash flow, working capital, cash reserves, and available credit to determine whether your dealership has the flexibility to execute planned initiatives while managing day-to-day operations. If liquidity is tighter than expected, now is the time to evaluate whether spending should be adjusted before year-end.
5. Are Your Expenses Supporting Your Goals?
This is also a good time to revisit spending decisions made at the beginning of the year and determine whether they continue to support the dealership's strategic goals. As market conditions evolve, expenses that made sense six months ago may no longer deliver the same return.
Rather than focusing solely on reducing costs, evaluate whether payroll, advertising, technology, and other operating expenses are generating measurable results. Identifying spending that no longer aligns with business priorities can improve profitability without compromising customer service or operational performance.
Looking Ahead
A successful year isn't determined in December. It's shaped by the decisions made throughout the year. A focused mid-year review gives dealership leadership the opportunity to evaluate what's working, address challenges, and make strategic adjustments while there's still time to influence the outcome.
By taking a proactive approach today, dealerships can enter the second half of the year with renewed focus, stronger financial discipline, and a clear roadmap for achieving their year-end goals.
Author: Erika Gagne, CPA, Albin Randall & Bennett, an NHADA Silver Partner