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Impact of financial decisions

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Good accounting transforms numbers and data into clear information you can act on. Settling for less can cost your business. Here’s how to recognize a weakness and take corrective action.

Impacts of financial decisions

Three Sure-Fire Ways to Know if You’re Neglecting Your Dealership’s Accounting

  • 3/9/2016

Dealers want to sell vehicles. Very few of you relish the accounting duties that are wrapped up in your business, and that’s completely understandable. But even when you delegate these important responsibilities to someone else, they shouldn’t remain mysterious to you. A good accountant transforms numbers and data into clear information you can act on. It’s as straightforward as that.

Your accounting services are as critical to your dealership team as your sales, service, and parts departments. But still I see dealers settle for subpar accounting services, mostly because finances are foreign to them and they don’t really know what they are missing. Their businesses suffer or don’t do as well as they otherwise might with the help of a truly capable financial team. Very often, it’s not the fault of the people already doing the job; they just need some reinforcements, and as the dealership’s owner or leader, that’s up to you.

Over the years, I’ve come to recognize three tell-tale signs that a dealership’s accounting isn’t contributing to the success of the business on the level it could be. If any of these three descriptions sound familiar, it’s probably time to take a good look at the way you regard and make use of these functions, then take corrective action or look for additional solutions that bolster your existing team.

1. Your “accountant” is actually your receptionist wearing a bookkeeper’s hat

It’s common for smaller and midsize dealership employees to be jacks of all trades, and many receptionists or other back-office people valiantly take on a host of administrative responsibilities. While these hardworking office chameleons are indispensable in so many ways, they can’t provide the credentialed professional-level skills and insight you need to truly manage your dealership’s finances, grow your business, and be more profitable.

Making do with what you already have is wise and scrappy in many cases, but it just doesn’t cut it in accounting. You simply can’t make good business decisions without a strong handle on your finances and all the complicated things bundled up with them, like taxes and other regulatory and compliance matters. But when you understand and control your budget, cash flow, forecasting — the full scope of your finances — you can run your dealership much more capably. Bringing a financial professional on board — either by directly hiring or, more affordably, outsourcing — is genuinely in your best interest.

2. Your CPA or accountant is flummoxed by your DMS software

It’s true: Dealer management systems (DMS) are truly complicated and require some intense training, and even many seasoned financial professionals never get a real handle on them. If your accountant and your DMS are in constant conflict, it’s almost certainly costing you. Unless your accountant has a deep understanding of the dealership industry, he or she will likely never use the DMS to its fullest capacity — which means you could be missing out on its true value and the near-limitless insights and benefits it can deliver. It’s an expensive waste.

Your DMS most likely can send accurate information directly to your general ledger and help you understand all your business transactions. It can also manage several complex tax functions. Many dealers end up paying more than necessary in taxes and fees because their CPAs are so confused by the software. If this scenario is familiar to you, it’s time to either send your accountant to DMS training or add an outsourced professional to your staff who already has industry experience and can make the most of this critical management system.

3. Your trial balance or financial statement looks like a Picasso painting

These should be clear as day, not total head-scratchers. Your dealership’s trial balance and financial statements can be profoundly effective analytical tools, providing all kinds of financial and operational metrics. They tell the story of your business, and they should read like a picture book. If these aren’t treasure troves of precise, actionable information, then you should consider adding an outsourced accountant who can “paint” more like Rembrandt.

How to fix the problem

If you recognize any of these signs at your dealership, there are several ways you can shore up the deficiencies and start seeing improvements in your financial information. A variety of outsourced services are available in scalable portions that can fit your dealership’s specific needs and budget. Whether it make sense to hire directly or use outsourcing to augment your team, remember that the success of your business depends on qualified people, and finances are too precise, complicated, and critical to compromise.

A good outsourcing option should include training and education, which could be a fitting remedy in those situations where you your existing accountant is a great employee who just needs some more exposure. With some instruction, he or she could learn to add the value you need from these services. Developing people and helping them in their careers often earns their loyalty and spreads valuable knowledge more abundantly throughout the dealership. You don’t ultimately have to add a finance employee to your payroll to take advantage of CFO- or controller-level skills and insights. Any and all accounting functions can be outsourced, and in any capacity — part-time permanent, temporary full-time, long-term or short-term, whatever you need.

Above all, look for dealership-specific financial services. That specific industry knowledge is essential when it comes to making the right financial and operational decisions.

How we can help

CLA’s dealership industry practitioners can help you determine if you are getting real value from your existing accounting and reporting services and work with you to identify metrics, understand financial statements, and make informed financial decisions. We can help customize an outsourcing or consulting solution that precisely accommodates your specific needs, including business operations, special projects, training, and executive search.