By Thomas England and Rob Zurinskas, DHG
As dealerships expand, the logistical and operational complexities of processes such as accounts payable, accounts receivable, cash flow, billing, and payroll can become cumbersome and costly. That calls for an examination of how those processes are handled.
Some questions that should be considered include: Should there be a controller for each store? Can an office manager handle two or three different stores? Should a consolidated accounting center be set up by process or by store?
Thomas England
The functions can become easily muddled – particularly as accounting functions’ sophistication and actual processing will vary from store to store.
A growing number of multi-store dealers are transitioning away from location-specific accounting functions in favor of a centralized service model, where all core process areas are operated out of a common office or service center.
In addition to the potential cost reduction, an accounting office consolidation can offer the following benefits:
- Improved efficiency and accuracy in reporting
- Strengthened internal controls
- More efficient monthly closings and reporting
- Ease of streamlining information and processes across locations
- Enhanced roles and responsibilities
- Opportunity to attract, develop, and retain talented employees
- Process standardization yielding more accountability
- Consistent performance measurement
- Appeal to potential buyers in a dealership sale
Communication key
When centralizing accounting processes, it’s important to prepare accordingly least the culture shift derail the effort. Specifically, communication surrounding roles and responsibilities needs to be clear. If clarity is lacking, the consolidated accounting center will likely not succeed.
Furthermore, there needs to be buy-in and support from operations as well as accounting. A change in organizational structure this significant takes time and needs to be well thought out for continued success.
The “Define, Measure, Analyze, Improve, Control” framework, as seen in the Six Sigma approach for data-driven improvement surrounding business process stabilization can be leveraged.[1] Dealers should consider familiarizing themselves with some key process areas when setting up a central accounting center, or looking for assistance from a trusted advisor. The process areas are:
Deal Jackets – Focus on both paper and electronic items that would delay the process. Working closely with a compliance team will help determine the root cause of bottlenecks and obtain proof of error to improve effectiveness and efficiency. A third-party provider can baseline the current process and set up measures so that the dealer sees if it is operating within the expected range.
- Titling – Due to the high level of risk, it is integral to start with process maps for each state that the center services, as state requirements vary widely. Having these process maps will allow the dealer to “see” areas that might invite potential defects. Determine baseline performance and use a management-by-fact approach to find efficiencies in the process. In addition, create a strong feedback loop to the dealerships so that process changes and /or training can occur to reduce rework.
- Accounts Receivable and Cash – Look outside of aging reports to identify where money has been left on the table, as it is easy to “write off” aged receivable as opposed to researching the reasoning behind the aging.
- Accounts Payable – Dig into the month-end closing process and standardization of accounts to identify automation opportunities, especially within inter-company transactions where there is a high level of risk of error. The larger the dealership group or the more inter-company transactions that occur, the higher the risk.
- Compliance Department – Review the checklist, policies, and procedures to ensure all teammates know what to do and how to do it. Dealers often allow different manufacturers to default to F&I departments and designate different controls based on the argument that everyone is different. While there are differences among manufacturers, dealerships should consider employing a required, agreed-upon process before changing any policy. Furthermore, the policy should be reviewed and approved prior to implementation.
- Warranty and Rebate Receivables – When working with a consolidated accounting center, it’s important to be familiar with the various manufacturer rebate programs. Know them inside and out and track how they change over time. Determining whether this is a store level or accounting center responsibility (or a combination of both) should be a priority. The real key is to make sure there is clear communication surrounding who is responsible and what success looks like.
Don’t forget about…
Beyond defining roles and responsibilities surrounding key process areas, there are additional general items to keep in mind on an ongoing basis surrounding a consolidated accounting center:
Rob Zurinskas
- KPI Implementation – After extensive interviews, a dealer will want to clearly define the dealership’s key performance indicators (KPIs) and subsequently work in tandem with the IT department to develop an automated dashboard (and keep a continuous eye on KPI activity). Once KPIs have been established, track them over time and account for any large degree of variation.
- Establish Initial Baselines – Through interviewing techniques and analyzing operational and sales metrics, establishing baseline measures that may be used for service level agreements is recommended. Doing so helps to ensure the leadership team maximizes the capabilities of the consolidated accounting office.
- Shared Service Advocate for IT Resources – Consider using a management-by-fact approach to validate your IT resources’ output and get them productively working on projects.
- SWOT Analysis – Analyze the strengths, weaknesses, opportunities, and threats of the service center. Summarize the key findings and leverage the results to identify improvement areas. SWOT analyses can be geared towards specific projects with short-, medium-, as well as long-term deliverables.
- Review of the Close Process – Seek efficiencies and standardization opportunities with the objective of removing days from the monthly process, and potentially reallocating that time and resources where needed.
- Store Level vs. Consolidated Level Responsibilities – The key to determining whether certain processes (such as rebates or warranty) should be handled at the store or consolidated center is to gain consensus from operations and accounting, identify responsible parties, and continue to reevaluate the best practices for your culture.
- Identify a Service Center Champion within the Dealership Network – Keep that person informed of all the performance changes occurring so that he/she can articulate (in the dealership’s voice) how and why things are improving.
Plan ahead
There are many factors to consider when deciding if a consolidated accounting office is the right move. Since a dealer can’t just snap a finger and expect the centralized office to be in full swing by tomorrow, adequate preparation is key.
Between ensuring leadership buy-in, navigating the right time frame and phase-in approach, remaining on top of the continuous communication to all affected parties, and the process areas detailed above – the consolidation road map can take a few turns.
Nonetheless, there is not a one-size-fits-all approach. The implementation processes will differ depending on the group. Having the right team in place to help guide the process is fundamental in the ultimate success of a well-run consolidated accounting office.
Thomas England is the Assurance Senior Manager at DHG Dealerships. He can be reached at 1-404-575-8917 or thomas.england@dhgllp.com. Rob Zurinskas is senior manager at DHG Risk Advisory. He can be reached at 704-594-8130 or Ron.Zurinskas@dhgllp.com
[1] “The Define Measure Analyze Improve Control (DMAIC) Process”. The American Society for Quality. http://asq.org/learn-about-quality/six-sigma/overview/dmaic.html
