Floor Plan Inventory Accounting

A longer turn time for inventory eats into cash flow.

Floor plan inventory accounting. The arrangement is most commonly used when large assets such as automobiles or household appliances are involved. Contrary to common perceptions most car dealers do not pay cash for the. And in a soft economy that can pose a serious problem both for the lender and the retailer. These floor plan finance formulas incorporated with your turn time can help to make or break your dealership s profitability.

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. Floor planning is commonly used in new and used car dealerships. 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.

Floor planning is a method of financing inventory purchases where a lender pays for assets that have been ordered by a distributor or retailer and is paid back from the proceeds from the sale of these items. 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. 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.