Who EARNED...the Income?

Brad Bossen
On the monthly financial statement, within the Parts Department, there is an account titled 'Discounts Earned'. This is the price savings (discounts) earned by the Parts Department when they purchase large quantities of bulk oil products for use in the shop. The dollar amount fluctuates from month to month depending on the amount of oil products used by the Service Department. It's one of those mysterious accounts that only the Comptroller and the Parts manager are aware. These discounts are passed along to the Parts Department by the contractor that supplies the dealership with bulk oil products. In large dealerships where larger amounts of bulk oil products are consumed in the shop, the account is pretty significant. In smaller dealerships the monthly distribution is much less. Generally, most dealership accounting departments (out of habit) simply carry this monthly total to the bottom of the financial statement where it is deducted as "other income." The reasoning at some point was; that this money was "unearned" and should not reflect in the GP of the department, possibly favorably impacting the income of the Parts manager! I continue to take issue with this 'old school' thinking. The money in this account is a direct result of the smart purchasing and negotiating practices of the Parts manager and the department's fiscal responsibility. It's no different than the Parts Department purchasing additional quantities of retail products to receive a volume discount? The funds should reflect as a reduction in COS, which will reflect as an increase in Parts Department GP. HOME WORK: Pull out last year's December statement. Parts Dept, Discounts Earned YTD, deduct that amount from your COS and re-compute your GP! Just an opinion!

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