069 Outside Services

069 Outside Services - Other

Expenses

Semi-Fixed

Synopsis

Sometimes, it is necessary to hire specialists to perform various services for the dealership. Often due to the need for specialized equipment or because of insurance restrictions, it is cost effective to hire out various tasks such as Janitorial Services, Annual Parts Department Inventory, tree trimming and other such jobs. Work performed by service vendors are considered Outside Services and are posted in Account 069, Outside Services – Other. Not included are Data Processing expenses, which are recorded in Account 068, Information Technology Services and professional accounting and tax consulting fees that are posted to Account 072, Legal & Auditing Expense.

Debits

Credits

Cost of all Outside Services Other than data processing and legal & auditing
Outside services include the following:

a. janitorial or custodian services

b. landscaping & gardening services

c. trash & rubbish removal

d. snow removal

e. security & burglar alarm services

f. credit bureau services

g. Parts Department annual physical inventory

h. collection agencies

i. bank credit card service charges

j. temporary employees

k. armored car service

l. shopper’s surveys

m. messenger services

n. warranty claims preparation services

All other services not listed above performed by outside vendors

Example 1

Record the $2,175 monthly invoice for credit bureaus. The $2,175 is distributed between the New Vehicles Department and the Used Vehicles Department based on usage in the example shown below.

Journal: Purchase

Entry:		Debit	Credit
Account 069-01	Outside Services (Other) – New Vehicles Department	$1,327
Account 069-02	Outside Services (Other) – Used Vehicles Department	$848
Account 300	Accounts Payable – Trade Creditors		$2,175

Example 2

Record the $2,635 monthly expense of trash removal, which is distributed to each department as shown in the example below.

Journal: Purchase

Entry:		Debit	Credit
Account 069-01	Outside Services (Other) – New Vehicles Department	$511
Account 069-02	Outside Services (Other) – Used Vehicles Department	$403
Account 069-03	Outside Services (Other) – Lease & Rental Department	$54
Account 069-05	Outside Services (Other) – Mechanical Department	$595
Account 069-06	Outside Services (Other) – Body Shop Department	$269
Account 069-07	Outside Services (Other) – Parts & Accessories Department	$534
Account 069-09	Outside Services (Other) – General & Administrative	$269
Account 300	Accounts Payable – Trade Creditors		$2,635

Distribution of Expenses

	Departmental Distribution
069 Outside Services - Other	New Veh.	Used Veh.	Lease & Rental	Mechanical	Body Shop	Parts & Access.	Gen & Admin.
	01	02	03	05	06	07	09
Protection of entire premises	Relative value factor	Relative value factor	Relative value factor	Relative value factor	Relative value factor	Relative value factor	Relative value factor
Protection of new car storage lot	Total expense
Physical inventory of parts and accessories						Total expense
Bank service charges							Total expense
New car showroom window washing	Total expense
Refuse and snow removal	Usage	Usage	Usage	Usage	Usage	Usage	Usage
Credit card service fees	Dept. making sale	Dept. making sale	Dept. making sale	Dept. making sale	Dept. making sale	Dept. making sale
Collection agency fees	Dept. making sale	Dept. making sale	Dept. making sale	Dept. making sale	Dept. making sale	Dept. making sale
Credit reports	Usage	Usage	Usage	Usage	Usage	Usage
Management fees	Total Expense	Total Expense	Total Expense	Total Expense	Total Expense	Total Expense	Total Expense
Shopper’s service fees	Usage	Usage	Usage	Usage	Usage	Usage
Janitorial service	Usage	Usage	Usage	Usage	Usage	Usage	Usage
Warranty claims preparation service				Dept’s percentage of warranty sales	Dept’s percentage of warranty sales	Dept’s percentage of warranty sales

Comments

Competitive bids should be requested or price comparisons should be made whenever Outside Services are contracted. It is important to search for the best value at the lowest price. A Purchase Order should be issued for each vendor and for each service. The invoices received from the vendor must be compared to the original Purchase Order and discrepancies should be resolved immediately. The manager of the department benefiting from the Outside Service should be responsible for inspecting quality and controlling costs.

Note:

When employees are assigned work tasks typically performed by an outside vendor, it is advisable to make sure that the employee has reasonable experience, training and skills. For the protection of the dealership, sufficient insurance coverage must be in effect.

Departmental Distribution

069 Outside Services - Other