Managing Vehicle Finance Stocking

This guide outlines the steps to accurately track the funding, interest, and repayments for vehicle finance stocking (floorplan finance) within your accounting system.

Step 1: Create a Purchase Ledger Account for the Funder

Set up a single Purchase Ledger Account for the finance company (funder). This account acts as the primary financial record for the transactions related to the overall stocking agreement with that specific funder.

Step 2: Record Initial Funding Received (Loan Advance)

When you receive the payment from the finance company for a specific vehicle, record this as a negative payment on account to the funder's Purchase Ledger Account.

• Reference: Crucially, reference this transaction with the vehicle's Registration or Stock Number (e.g., Reg: AB12 XYZ or Stock: 12345). This allows you to easily track which vehicle the funding relates to.

• Effect: A negative payment on account effectively increases the credit balance owed to the funder by you (reflecting the cash received) or, more accurately for this purpose, immediately creates a liability to the funder for that specific vehicle's funding amount.

Step 3: Processing Interest Payments (Funding Costs)

When you receive an invoice for interest charges:

• Treat the invoice as a standard Purchase Invoice.

• Post the invoice to the funder's Purchase Ledger Account.

• The corresponding ledger nominal should be an appropriate Interest Expense or Finance Cost account.

• Mark the invoice as paid when the cash payment is made to the funder.

Step 4: Recording Capital Repayments (Repaying the Loan)

When you make a capital repayment specifically against a funded vehicle:

• Post the repayment to the funder's Purchase Ledger Account as a part payment against the initial funded balance (the negative payment on account you recorded in Step 2).

• Effect: This direct application of the payment to the liability created in Step 2 will reduce the outstanding balance owed for that specific vehicle.

Step 5: Final Settlement upon Vehicle Sale

When the vehicle is sold, the final required capital repayment is made to the finance company.

• This final repayment should be posted as a part payment against the original funded balance.

• Net Off: Once the full capital amount (Step 2 liability) has been repaid through capital repayments (Step 4 and 5), the individual vehicle transaction within the funder's Purchase Ledger Account should net off to zero, showing that the full amount for that vehicle has been cleared.

Step 6: Handling Interest Payments for Individual Vehicles (Detailed Costing)

If you require detailed tracking of the true cost of funding for each individual vehicle:

• Post the interest invoices as Sundry Costs against the specific vehicle record within your inventory or vehicle management module.

• Assign the interest cost to the appropriate Supplier Account (the funder).

• Note: Even when tracking it at the vehicle level, the primary accounting entry (Step 4) must still be made to the funder's Purchase Ledger Account to manage the cash flow and payable balance correctly.