How to Process External Financing Inside Lizzy
External Financing is the process of your dealership going through your banks to find outside
financing for another dealership. You are the middleman between the banks and the Financing
dealership ( which we’ll refer to the financer ). They own the item being sold, its their customer
that is buying it. You are simply being the middleman in getting them financed. It allows you to
receive the dealer reserves on the financing.
The first idea behind this was to do this with miscellaneous parts on the invoice and handle
it that way, but many complications rose. The first is that there can be several different “deposits”
you have to deal with. ( One from the buying customer, possibly one from the selling customer if
the “payoff” is more than covered by the loan proceeds, etc ). The other concerns were on the
invoice itself. One, if you do a couple of these a month, you could have a huge amount of “nontaxable”
sales showing up on your tax reports – which always raises suspicion at the state level –
why flag yourself for an audit for no reason, and Two, it messes up your S&R percentages and Daily
Reconciliation percentages for any period these fall in.
So after reviewing the different processes available, we decided the cleanest way to handle
this is going to be in the accounting department. The finance department will be doing all of the
legwork, and filling out of paperwork, but the accounting department will be entering the
information into Lizzy.
The finance department does all of the paperwork, and submits to the bank in question. At this
point in time, the finance department should know the following:
- Loan Proceeds ( how much is the check we are receiving from the bank )
- Additional Deposits ( any additional checks we received from the buyer/seller )
- Liable Fees ( any fees that will be due to be paid from the Loan Proceeds )
- Reserves ( your share of the monies being processed )
At this point, the financing department is done. The accounting department takes over and enters
the information into Lizzy for tracking/processing.
The accounting department does the following:
- Creates a receivable to the bank for the amount of the check we are to receive. The
offset of this account will be the External Dealership Financing Account ( which should be
an “Other Current Liabilities” account. We created a Summary Account named External
Financing as 269.00.000, and then created a sub account External Dealership Financing
as 269.00.100 ).
- Use the Add Money tool to add any additional deposits received on this deal ( or do so
when you receive the deposits in ). They should be entered however they are received
( i.e. Cash, Check, Visa, MC, etc ), and for the amount the are for. The account number
nizeX, Inc. PO Box 737 Jackson GA 30233 Office: 678.999.2144
will be the External Dealership Financing account we have already created and used to
make our Receivable.
Once you have received in the Loan Proceeds check from the bank:
- In receivables, receive the payment from the bank.
- Write checks to all of your Liable fees vendors – offsetting the same External Dealership
Financing Account we’ve been using.
- Write the check the Dealership we did the financing for ( which should be the bulk of the
loan proceeds and any “commission” we give them for sending us the business.
- At this point – all that should be in the External Dealership Financing Account should be
our reserves ( for this deal – if you have multiple deals overlapping, then the Account
itself might contain a higher balance ). Go to General Ledger, and Create an adjustment
moving our reserves from the External Dealership Financing Account to External
Financing Reserves account ( which we defaulted under Income from F&I master account,
and used the sub account 449.00.100 ).
At this point – this deal should be completely finished and processed.