Inventory Management Is the Backbone of Your Dealership: How to Audit Your Units

When we first published this piece in 2019, a dealership inventory manager described inventory as the hub of the whole store. When a customer calls about a specific machine, say one with a snowplow fitted, the salesperson should be able to say "yes, I have four with plows" and know exactly where they are and whether they are ready. That confidence is only as good as the record behind it.

This update is about proving the record is true. It is a guide for the GM, controller or inventory manager who runs a physical audit of whole-goods units (new and used machines, not parts): what your floor plan lender checks, how to count and reconcile, and how often. For the weekly routine of aging and floor plan cost, see our powersports inventory management best practices. If you are choosing software, use our inventory software feature checklist.

What a dealership inventory audit covers

An audit compares four versions of your inventory. They should agree; usually they do not.

A unit on the lender's list but not on the lot is the most serious gap. A unit online that sold last week is the most visible one. A unit on the lot but missing from the DMS is the one nobody is selling.

What your floor plan lender's audit looks for

Each lender writes its own rules into your floor plan agreement, so read yours. For a general picture, the Office of the Comptroller of the Currency (OCC), which supervises national banks, sets out what it expects banks to do when they check a dealer's floor in its Comptroller's Handbook: Floor Plan Lending. Some of it:

• Frequency. Floor plan checks should be done "at least quarterly", and more often depending on repayment terms and the dealer's financial condition. The handbook gives the example that "pay as sold" loans should generally be inspected more often, "such as on a monthly schedule".
• Announced and unannounced visits. Inspections should include both. Warning signs, such as unpaid curtailments or out-of-trust sales, should lead the bank to inspect more often.
• Units off the lot. For a unit out on a demonstration or at a body or detail shop, the bank may ask the dealer to produce it "within a reasonable time, e.g., two days", or visit where it is.
• What is checked. Identifying documents, serial numbers and comparison with inventory lists, to confirm each unit exists, its condition and that it is available for sale. The handbook's internal control questions list make, model, year, serial number, odometer reading, condition and location.
• Demonstrators and loaners. Mileage should be checked so the unit is not losing value faster than expected, and the internal control questions ask whether all demonstrator units under the floor plan are checked.
• Sold units. A unit sold without repaying its advance is "sold out of trust". Missing units reported as sold should tie to contracts in process within a reasonable time. The handbook notes that high-volume dealers are "usually granted a three-day leeway" before payment is due, and that paying off a missing unit only when the inspector arrives can be a sign of a float.
• Follow-up. Missing units and the dealer's explanation should be verified and followed up at the next check.

This describes how bank examiners expect lenders to work, not your lender's specific rules. Manufacturer finance companies and other lenders set their own terms. This is general information, not legal advice.

Why the lender's audit is not enough

Most pages on this topic are about passing the lender's floor check. That check protects the lender, so it looks at units the lender financed. It does not look at:

• Used units you own outright, or trades not yet floored.
• Your website and marketplaces. A unit can pass a floor check and still be listed after it sold, or be missing from your website while it sits on the lot.
• Keys, recon status or listing quality. The lender asks whether the unit exists, not whether a salesperson can sell it today.
• Your own staff. An outside check does not replace internal controls.

An accounting firm makes the same point. Writing for dealerships in 2019, Eide Bailly's William Hinsdale asked dealers: "Are you just relying on a floor plan audit to know things are good?" He set out three controls for your own counts:

1. Segregate duties. Counters "should be independent from anyone who has physical access to inventories", such as salespeople or lot porters with keys. The person counting should not be the person reconciling, and the reconciliation should be "separately reviewed and approved, perhaps by a business manager or controller."
2. Count blind. The counter "makes a list of what is present from scratch", not by ticking off a printed list, which tends to hide discrepancies.
3. Count often. "Whatever you do, make it frequent." He also suggested an occasional unscheduled count.

Your own audit is the one that covers all four records. Run it so the lender's audit finds nothing new.

Dealership inventory audit checklist

Use this for each unit. Anything that does not match goes on an exceptions list with an owner and a date.

How to run the count

1. Pick a cut-off time and stop posting deals and transfers until the count is done, so the records do not move under you.
2. Pull the DMS list and the lender's list, but do not give them to the counters. They count blind.
3. Split the lot, showroom, warehouse and recon area into zones and give each zone to a counter who does not sell or move units there.
4. Record each unit: VIN or serial number, location, key present, hours or miles where relevant, and a photo of anything that looks wrong.
5. List every unit that is not on site, with where it is and who confirmed it: out on a demo, a loaner, at a body or detail shop, at another rooftop, in transit from the manufacturer, or sold and awaiting delivery.
6. Reconcile. A different person compares the count with the DMS, the lender's list and the website, and lists every difference.
7. Investigate each exception. Hinsdale's list of explanations includes unprocessed sales, units out for service by third parties, units used as personal vehicles or loaned out, and consignment units a salesperson is selling on the side.
8. Get the reconciliation reviewed and approved by the controller or business manager, and fix the records: DMS, website and lender.
9. File the results with the date, counters, exceptions and fixes, so the next count, and the lender's next visit, can be checked against it.

Units that cause most of the exceptions

• Demos and loaners. Record hours or miles every count. The OCC handbook asks whether demonstrator units have separate curtailment requirements, so check your agreement.
• Units out for service. Keep a written log of units at outside shops. If your lender asks to see them, you may have little notice.
• Sold but not delivered or funded. Tie each one to its deal and check the payoff will reach the lender within your agreement's allowed time.
• Trades. A trade appraised but not booked into the DMS is invisible to everyone but the person holding its key.

How often to count

There is no single required schedule for a dealer's own counts; your lender, manufacturer and accountant may each set expectations. This is our suggestion, not an industry standard:

Where software helps

A count is only as fast as your records are clean. PSX Ascend's powersports inventory management software keeps one connected record for each unit:

• Guided mobile capture, so staff photograph each unit and complete its details from a smart device when it arrives.
• One record feeding supported website, marketplace and marketing destinations, to reduce mismatched photos, details and prices between your lot and your listings.
• Aging visibility, showing which units need a pricing or merchandising decision.
• Rooftop comparisons across a group.

Your DMS stays the record for cost and floor plan, and the count itself is still done by people walking the lot.

You can also see the same inventory management tools on our sister site, PSXDigital's inventory management tools page.

Sources

• Office of the Comptroller of the Currency, Comptroller's Handbook: Floor Plan Lending, version 1.2, January 2017 (reputation-risk references removed March 2025). Inventory Inspection, pages 18 to 19; Internal Control Questionnaire, pages 46 to 47.
• William Hinsdale, Eide Bailly LLP, Why Your Dealership Could Be Doing Its Inventory Count All Wrong, Mondaq, August 2019.