When Should Car Dealerships Consider Centralizing Accounting Processes?
Growth often is a good sign to a business owner their company is doing well and can allow the owners to expand their business footprint. For dealership owners, growth often means having more dealerships under their umbrella. With this growth comes complications, especially when it comes to accounting practices.
Dealership owners typically have three options when considering how to handle their accounting practices for multiple locations: centralized accounting, noncentralized accounting, or a hybrid of the two.
Benefits of centralized accounting for dealers
Centralized accounting means having all accounting operations under one roof, no matter how many dealership locations you own. Here are some of the benefits your dealership network could realize by using this model:
- Improved corporate governance through more efficient methods of managing policies and procedures. Internal controls and standards are easier to implement and monitor with all accounting personnel under one roof.
- Improved accuracy with fewer employees doing the same work. Dealers can also build in second checks; whereas if only one accounting person works at a dealership location, there would be no one to perform that check.
- More efficient monthly closings and reporting since all accounting data are handled at one location. This means dashboard reporting is not waiting on one or two locations to submit their reports reports.
- Opportunity to attract and retain top talent. With fewer employees needed, dealers can afford to increase pay or benefits to have the best employees.
- Reduced administrative costs. Dealers can recognize a reduction in overhead costs such as wages and benefits by leveraging technology’s role in consolidating functions to eliminate onsite desk space.
- Improved relationships with vendors because of consolidated billing/payment techniques. Dealerships can consolidate billing to each vendor by sending one bill with a line item for each location rather than a separate bill for each location. Vendors will also have a single point of contact for questions or concerns.
Drawbacks to consolidated accounting for dealers
While consolidating all accounting into one location may seem like an easy choice, dealership management should consider the following concerns and questions before moving forward.
- Staffing concerns. This is often because of a lack of accounting support at the store level for general managers.
- Expanded job roles. Dealership locations must focus on hiring competent individuals who can be assigned to remit the correct documents and information, when necessary, to accounting.
- Paperwork management processes. Dealers must have a process in place to move paperwork, cash, documents securely from one location to another. Consider using the parts driver or possibly an overnight courier service to fulfill this need.
- Current technological capabilities. If your existing technology cannot support centralized accounting, it may be time for an upgrade. While upgrading technology can make things easier in the long run, there usually is an upfront cost and time investment to train employees on the new systems.
- Customized approach. A one-size-fits-all approach doesn’t work for centralized accounting since each dealer network has different accounting needs. Consolidating your accounting processes into one location requires thorough planning and preparation specific to your dealer network.
- Changing department needs. Realizing redundancies in current employees may lead to reassigning employees or eliminating their position.
If the benefits of centralized accounting outweigh the cons, or you decide to adopt a hybrid approach, the next step is creating a plan to explore how and when you can make changes to minimize disruption to your customers and employees. Look at where there may be overlap, what tasks will be moved to centralized accounting, if your dealerships will be switching to all-digital paperwork, and whether you’ll transfer one process or one dealership at a time.
However you choose to implement the changes, make sure you are clear in your communications to your teams about what you expect and when.
For assistance with creating a streamlined accounting process or for an audit of dealership accounting practices before transferring to centralized accounting, reach out to our team of accounting professionals today. For more information, contact Keith Laudenberger via our online contact page.
Councilor, Buchanan & Mitchell (CBM) is a professional services firm delivering tax, accounting and business advisory expertise throughout the Mid-Atlantic region from offices in Bethesda, MD and Washington, DC.