BHPH benchmark sneak peek: allowance for bad debts

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When compiling the 19th version of the buy-here, pay-here industry benchmarks, Ken Shilson noticed a metric climb to a level never seen previously — the allowance for bad debts.

On one hand, the president of Subprime Analytics and the National Alliance of Buy-Here, Pay-Here Dealers acknowledged the figure could be viewed negatively because of how much operators are financing to their customers nowadays. But Shilson also emphasized how the growth in the allowance for bad debts actually can help BHPH dealers in an important way — preparing them for significant changes coming in association with accounting mandates for this item.

As has been mentioned in BHPH Report previously, the upcoming changes in accounting regarding the allowance for losses could influence capital providers and operators.

This past summer, the Financial Accounting Standards Board (FASB) issued an accounting standards update the organization explained was designed to improve financial reporting by requiring timelier recording of credit losses on loans held by financial institutions and other organizations. And those organizations can include related finance companies that hundreds of BHPH dealers use as the conduit to originate and maintain their portfolio of contracts on the streets.

Because it’s such a monumental shift, the FASB indicated that the new rule doesn’t go into practice until the end of 2020, giving operators several years to prepare for the change.

But at least to a degree, Shilson is seeing dealers prepare for the change since the allowance for bad debt reached an all-time high, according to the industry benchmarks he will present during the 19th annual BHPH Conference at the Wynn/Encore in Las Vegas on May 23 through 25. Shilson mentioned the benchmarks are even more robust this year because the data supporting the metrics is derived not only from Subprime Analytics’ pool of operators, but also the 20 groups hosted by NCM Associates as well as the National Independent Automobile Dealers Association.

It’s that fact that prompted Shilson to emphasize how he believes the latest benchmark in allowance for bad debts and upcoming accounting changes are so closely tied.

“Everybody needs to understand the new standard and everyone needs to understand how it’s going to affect them in their borrowing relationship. That needs to happen now because you don’t want to blindside your lender. You don’t want to wake up and have to apply the standard and then figure out your equity just disappeared,” Shilson said.

To help operators understand these changes, Shilson is bringing to this year’s conference a pair of executives who in his opinion are “two of the smartest guys on this subject that I know.” Set to appear during panel discussions and what NABD is dubbing its “Solutions Hall” are John Donaldson of Ace Motor Acceptance and Ronnie Lee of RSM.

“Those two guys really understand it,” Shilson said about the knowledge Donaldson and Lee have to convey to conference attendees about the relationship between operators and capital providers is likely to change because of these accounting changes.

This year’s conference also includes 12 interactive workshops that will be covering:

—An accounting/tax update


—Compliance hot topics

—A current developments update

—Getting your best customers back

—Reconditioning best practices

—Keeping customers paying and increasing recoveries

—Sourcing and financing the right inventory

—Technology solutions for GPS

All of the educational sessions will be at Encore this year which was recently renovated and won the Travelers Magazine award as the finest hotel in Las Vegas. All the Encore rooms are suites and NABD secured $209 discounted room rates with no resort fees while supplies last.

Shilson emphasized the prices for accommodations “make this fabulous facility affordable to everyone.”

Attendees may register online at or by calling (832) 767-4759.

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