Many businesses have failed due to poor accounting and finance departments, so why would a business under spend in this critical area of the business? Given the current economic climate, an easy area to question costs might be the accounting department. While I am of the opinion no department is sacred, including accounting, before anything drastic is done, I suggest conducting a thorough review of that department’s effectiveness and ability to adequately serve the rest of the dealership.
Choose someone independent of the function to conduct interviews to see how the department is functioning from the user’s perspective. This could be the internal audit department, another accounting office, another general manager, or your outside CPA firm. Conduct the interviews in a safe environment so that those being asked to comment will feel comfortable providing candid feedback.
The key to this assessment is to conduct interviews across the dealership to see what is working and what may need to be improved. Invaluable input will be received if this interview process if done right. Once this information is known, then management will have the background needed to make informed decisions on the accounting department’s effectiveness. For example, management might see a need for additional resources, or it could become obvious some personnel may need additional training or some personnel are just not effective.
Under spending on the finance side of the business can incur hidden costs every month. As an example, the competence of personnel dealing with the bank will play an important role in how that bank perceives your organization and the quality of interim financial information. Perceived incompetence or unreliable financial information may escalate the cost of capital or even make capital unavailable. As another example, your accounting firm may incur additional time making adjustments at year end to prepare the financial statements or tax returns. If the dealership had stronger accounting personnel, this additional time could be avoided.
The keys to any successful accounting function are competency, accountability, monitoring, a customer-first orientation, and ongoing training. If your dealership’s accounting department emphasizes these attributes, the financial side of the business will run smoothly and the organization can realize cost savings in many ways.