Enron is a name that many of us are growing tired of hearing. This whole situation stinks, but even in the retail automobile business there is a lesson to be learned.
If you run a clean ship, make sure you use a CPA firm that understands enough about your business to know you are running a quality operation.
Many CPA firms may be a member of the Securities and Exchange Section, the Private Companies Practice Section of the American Institute of Certified Public Accountants or maybe even both. As members of these, they're subject to periodic reviews by other CPAs. But just being proficient in general accounting and auditing area is not enough. Do they understand your dealership world?
As competition gets more heated and dealership practices more varied, there is an increasing need for sound financial reporting to management.
Good management decisions are dependent on prompt and accurate financial and operational information. To get this type of information, dealership management must get timely monthly financial statements on which they are able to rely.
Your CPA firm (you are playing with fire if you depend on a single CPA who understands the car business) must be familiar with the “profit center” concept used by the various automobile manufacturers for their franchised dealerships. By working with your staff, they should be able to assist in the improvement of the timeliness and quality of your monthly financial statements. This in turn helps provide for:
- Improved profit planning
- Proper measurement of profits
- Improved expense controls
Your CPA firm should be familiar with the contents of the “Automobile Dealership Accounting Guide” published by Practitioners Publishing Company.
This is one of the most widely used automobile dealership accounting and auditing guides in the country. It is used, not only by dealership controllers and office managers, but by other CPAs as well. For your CPA firm to be of real value to you, they need to understand the information flow not only in the accounting department, but for vehicle sales, F&I and fixed operations as well.
To simply understand the systems is often not enough. Your CPA firm should be able to help you monitor those systems.
In years past it was usually necessary to be on location at the dealership to be effective in this area. Today there are several tools available to assist your CPA firm in monitoring your dealership systems.
These include the eBarometer, eOperations, eExpense, the Dealership Internal Control Review Program, Strategic Assessment and the Parts Inventory Supervision and Reconciliation Program.
Each of these tools has proven to be effective in not only monitoring, but also increasing the reliability of dealership accounting and information systems. Additionally, the capability exists to dial into most dealership systems remotely to access financial and operational information that can then be reviewed by experienced professionals.
Your CPA firm should be familiar with the accounts, journals and schedules used by automobile dealerships. With this ability to “read” the books, your firm can show dealers not only problems, but also opportunities. Additionally, they can work with you to develop a process to allow you to effectively monitor your accounting department or even monitor it for you. Monitoring can be done monthly, quarterly, semi-annually and either on-site or remotely.
An automotive CPA firm brings both the dealership world and the financial accounting world together. Certainly some CPAs understand automobile dealerships and the related accounting issues. Additionally, membership in both the SEC and PCPS divisions of the AICPA indicates an understanding of the technical issues concerning compilations, reviews and audits.
But which level of service is right for you, and who can best help you decide?
Currently you prepare a monthly financial statement for the manufacturer you represent. Also you probably use this factory financial statement as a measurement and decision making tool. But do you have a way of determining the integrity of the financial information? Do other users such as stockholders, banks or other lenders rely on these factory statements? Should they?
Your CPA firm should have the skill sets that allow them to go underneath the factory statement and evaluate the integrity of the underlying accounting information.
View your CPA firm as a strategic partner, rather than a mandated compliance expense.
A client once told me, “You know, Donnie, CPAs can be a lot like fish. If they have been around too long they start to stink.”
Well, my response is, “A rough fish may lie around and stink, but a game fish is quickly digested and brings nourishment resulting in new and active brain cells.” Into which of these categories does your CPA firm fit?
CPA Don Ray is president of the George B. Jones Companies which includes an ISO 9002 certified accounting firm and computer consulting group in addition to a dealership search firm. He's at 901-684-5643 and [email protected]; website, www.gbj.com.