Industry sector:

Motor dealer: Cash sales

'Cash sales' means all income from your main business activities which is received at the time of sale. Your main business activities are likely to include new and used vehicle sales, vehicle repairs and parts sales. They may also include other activities such as car hire. Remember that, as well as actual cash received, Cash sales can also include:

  • credit and debit card payments
  • banker's drafts
  • cheques
  • payments from finance companies, including consumer finance schemes operated by your main vehicle supplier
  • electronic bank transfers
  • payments made through online payment services like PayPal - your used car department, for example, might sell part exchange vehicles on websites like eBay

To prepare your cash flow, estimate how much income you will receive over the next twelve months, including VAT. To do this you will need to estimate how many cars you are likely to sell, and at what price. You will also need to make an estimate of the amount of income that you will receive from the other 'departments' of your business, including servicing and parts sales. Consider how many such departments your business will have - for example will there be any fuel sales, a body repair shop or perhaps a café?

Seasonal fluctuations

Remember that you will sell more cars at certain times of the year than at others. March, September and January are key months for the new car trade. January is when many fleets renew their stock, while the large March and September peaks are caused by the biannual registration plate change. Late spring and early summer tend also to be busy times, particularly on Bank Holiday weekends, while your quietest times of the year are likely to be Christmas, February and the August holiday period. The time of year can also affect the types of car you sell.

Size of business

Think about what your long term business objective is. Do you, for example, intend to acquire a single franchise, or is your aim to acquire several franchises and open a number of different outlets? Perhaps you already have a franchise and are looking to expand your business into a multi-franchise operation.

Other issues

Also consider the following when you make your estimates:

  • your opening hours. To maximise sales, make sure that your business (or at least the car sales side of it) is open at times when people want to look for new cars - these include weekends, evenings and Bank Holidays
  • your reputation and image. Car dealers, even franchises, still have quite a poor image and you should make sure that neither you nor any of your staff compromise your reputation. Car manufacturers expect their franchised dealers to maintain certain minimum standards of quality, presentation and service
  • sales techniques. You will want to convert as many visits to your showroom as possible into actual sales. Consider how you and your sales staff will attempt to do this. Think about what makes you want to buy something - and what puts you off making a purchase.
  • the amount of competition. Doing some market research will help you to find out how strong the competition is
  • the location of your site. Customers will want to be able to reach you easily and park their cars when they arrive. A good location will also attract passers-by

Think too about the appearance of your premises - how will cars be displayed, for example, and what facilities will you offer to customers. Your main vehicle supplier will want to have some input into this aspect of your business and will probably set certain minimum standards for you to maintain.

Consider other ways that you might attract customers. For example, you might give away high street vouchers or consumer goods with some of the cars that you sell as a special promotion. You could also use your own discount voucher scheme. Always make the most of your vehicle supplier's own marketing and promotional campaigns.

Bear in mind that car sales - particularly new cars - are very closely linked to the economic climate. When the economy is doing well people buy more cars - and more large, expensive cars - but the opposite is true when the economy takes a downturn. Also consider the fact that the number of franchised dealers in the UK is currently in long term decline, a trend that is forecast to continue for some time yet. Give careful thought to the future prospects for your dealership, taking into account things like vehicle manufacturers' network strategies, costs, and financial viability.

To help with your decisions, click on the checkpoints for guidance. Once you have worked out a Cash sales figure add it to the relevant field in your cash flow forecast.