AUTOMOBILE DEALERSHIPS

The Who, What, When, Where & Why of Centralized
Accounting for your Dealerships

John Daugherty-Dixon Director of Dealership Services

31 December 2019

With ever-increasing costs to operate your dealerships, a sinking pool of skilled talent to hire and increasing regulations that must be met, the time is now for dealers to consider consolidating the accounting offices of multiple dealerships into one location. This is an ideal time for you to consider this growing trend in our industry, but just what is consolidated or centralized accounting and is it right for
your dealerships. Let’s look at the basics to who, what, when, where & why of how it works, what you need to understand, and how to plan & implement a centralized accounting department for your dealerships.

The WHO is simple. Any group of two or more dealerships should consider implementing this business model.  So, WHAT are we suggesting you do?  Reduce the number of actual, fully staffed accounting offices at your dealerships.

WHEN – the time is now.

WHERE – at any one of your current locations.

WHY would a dealer want to consider this business model?

The dealer can maximize the productivity of their employees.

The dealer will have a more standardized process and more consistency in the transactions that are being posted to the DMS (i.e. CDK, Reynolds & Reynolds, DealerTrack, Automate, etc.). 

The dealer will be able to reduce both the number of office managers and team members required to operate its dealership accounting offices. This will reduce the payroll, payroll tax, and employee benefit expenses each week.

How should a dealer move forward with the centralized accounting office model and what do they need to do next?

The steps to implement a centralized accounting office model are simple but first, require a detailed study of the dealerships and how they function on a day-to-day basis. It is not just the accounting office being analyzed, but the entire dealership. Remember every piece of paper is money to the dealership and every piece of paper is money to the dealership and every piece of paper must end up in the accounting office.

How the workflows into the accounting office can be very different in each dealership and the skill level of the employees in the different dealerships can be as different as night and day. The workflow in each individual dealership needs to be evaluated in order to establish one set of processes and internal controls that will be applied to the entire group.

Where does the dealer start planning the move to a centralized accounting office?

Analyze and understand the skill level of the Office Managers/Controllers and the team of clerks in each of the individual accounting offices.  Who is under-utilized? Who is the strongest leader?

How cross-trained is each of the team members? What will it take to cross-train more of the team?

After analyzing the accounting office staff, the dealer also needs to look at the general workflow coming into the office from the other departments as well as determine how well your dealerships’ DMS functions are being utilized. Are all ROs closing and posting automatically to accounting each night or is this still a manual process? Does each F&I office turn their deals into the office in a timely manner and are their deal jackets complete more than 90% of the time? Who reviews the invoices and approves the expenses from your vendors? How does the AP Clerk know if the invoice is approved for payment? These are all just some basic operation processes that the dealership should review on a regular basis and use the DMS to help keep the workflows going forward for the dealership.

Once the dealer has analyzed its operations at the dealerships, it is time to write an implementation plan to move the dealerships to the centralized accounting model. The plan needs to detail how the individual
workflows will be changed from being with each individual dealership business office to being sent into the centralized accounting office.

Here are some basic items that you need to account for in your implementation plan:

Which workflows should be consolidated first? Payroll and/or Accounts Payable?

How will information be sent from the dealership to the centralized accounting office?

What additional software or hardware will you need to add to your network?

Does the DMS offer a consolidate accounting format?

Then it is time to implement. The implementation of this new workflow will not be easy. You are creating a change in the culture of your dealerships and this is not going to run smoothly overnight. This is a change and most employees are not thrilled with change. The dealer needs to communicate with the management of the dealerships and explain why this change is important and explain why it will be positive for the dealerships. Then, the management will need to help the dealer communicate this message to the employees. Take it slow; do not rush the change. Be ready to continuously review the new workflow as you are making the transition, and be ready to modify the new process during implementation if necessary, in order to make it work effectively for your dealerships. Follow up after 2 or 3 months of running with the new workflows to test if things are working as planned.

Moving your dealership to the centralized accounting model is a short-term investment of time and money.
It is not going to bring instant savings to the dealership, however, over time the dealerships will be able to maximize the productivity and reduce the need for additional team members as the dealerships grow.

Remember the key steps to a successful implementation:

Analyze the current workflows and the employees

Plan the implementation in detail Communicate the positive benefits to the dealership and its
employees

Follow the implementation plan but do not rush the process

Re-evaluate the workflows 2 to 3 months after it is running.

Make sure you have the talent and the time to manage this process

Consider meeting with your OCD team. OCD has the experience and talent to help you to analyze, plan
and execute your implementation.

OCD’s experience will give the dealer and management the ability to keep their focus on day-to-day business and move the implementation forward at a quicker pace than management trying to manage the
daily business during the implementation process.

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