What is load and warranty provision and how does it work?

Load Amounts and Warranty Provisions explained

A Load amount is used as a way of accounting for overheads on the yard to ensure you have enough profit in the vehicle to cover the costs of holding stock in your yard. 

Warranty provisions are used so that part of the profit of every car can be taken up and put aside in the Balance Sheet to cover any unforeseen circumstances. For instance, where a vehicle has a fault that the dealership must repair at their own cost. 

How do they work?

A lot of confusion that comes about from the load and warranty amounts is the option of whether the load and warranty amounts post to the ledger or not. 

To start, regardless of whether the warranty and load are set to post or not, they will appear on the stock card and finalise screen. This means it will affect the gross profit of the vehicle, (this doesn’t affect the gst. These are just ficticious amounts whether posted or not). Commissions are usually worked out on gross profit so by reducing the profit, they reduce the commissions. 

Now the choice of whether to post the load and warranty just comes down largely to how you do your accounting/bookkeeping. Some companies like to keep track of the load while others only use it as a tool for keeping overheads accounted for. Warranty provision is more likely to be posted, as it is kept as a liability that may be used when repairs are required on sold vehicles, and some dealers want to keep track of whether warranties are costing them more than they are provisioning. This can then be used as a decision making tool for whether to increase the warranty provision or to change the stock they look to purchase. Other dealers don’t post the warranty and just use this to make sure their sales remain generally profitable even when repairs are required. 

To summarize -  The load and warranty provision are just used to account for additional expenses that aren’t directly costed to a vehicle, and can be used as a way of adjusting profit for commissions. The choice of posting or not posting either is just an accounting choice regarding how you show their profit for the year and doesn’t effect its use. 

Below is a brief example of a vehicle with a load and a warranty, looking at the various related screens with LOAD set to NOT POST, and WARRANTY set to POST. 

The accounts that the load and warranty will post to can be found in the Control Accounts tab. 

These are specific accounts, please do not change the name or number as it will cause issues

Comparing the finalise screen to the ledger we can see that there is no load in the ledger, making the amount in vehicle stock only $20,150 instead of the $20,650 seen in the finalise screen.