Floor Plan Inventory Accounting

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.

Floor plan inventory accounting.

Contrary to common perceptions most car dealers do not pay cash for the. Retailers use a short term loan to purchase inventory items and the loan is repaid as inventory is sold. 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. 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. This article reviews how you can manage floor plan financing with quickbooks. Floor planning is commonly used in new and used car dealerships. And in a soft economy that can pose a serious problem both for the lender and the retailer.

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. These floor plan finance formulas incorporated with your turn time can help to make or break your dealership s profitability. A longer turn time for inventory eats into cash flow.