To manage the tax burden of accrual accounting, many BHPH operators use a : Money matters: 3 major accounting changes to watch
: Income is recorded only when actual payments are received from the customer. buy here pay here accounting method
: While simpler and offering a clear view of current cash on hand, it can mask long-term financial health and often fails to meet bank requirements for financial statements. Strategic Dealership Structures To manage the tax burden of accrual accounting,
: Dealers may owe taxes on profits they haven't actually collected in cash yet. Cash Basis Accounting : Cash Basis Accounting : : Generally limited to
: Generally limited to dealerships with average annual gross receipts under $25 million (indexed for inflation, currently closer to $26–30 million).
: Expenses are recorded when incurred, allowing you to match the cost of the vehicle against the sale price in the same period.
: This is the standard required by Generally Accepted Accounting Principles (GAAP) and is typically demanded by lenders, auditors, and investors.
