By Marilou C. Vroman, CPA, CFE
‘Tis the season for open enrollment and the barrage of medical insurance options graciously delivered to your inbox. Not to mention our ongoing global pandemic which continues to impact our daily lives. Without a doubt, healthcare is still headline news. With this, I often reflect on human nature and how some people prefer preventive care and others tend to be reactionary. Some like to get their flu shot every year, and others take a chance and muscle through the fever, aches, and pains. This tendency towards one side or the other parallels how dealers tend to feel about investing in the preventive nature of an internal audit function. Some simply prefer to roll the dice and ultimately pay for losses that might have been prevented.
I recently visited the doctor for an annual physical and went through the usual tests including EKG, blood work and X-rays to help reveal any underlying health issues I may not be aware of. I felt perfectly fine leading up to and during the visit, and all the outward signs of being healthy were present. The test results fortunately revealed I was in good health. So, if we appear to be healthy on the outside, or our last physical exam result was good, why do we keep going to the doctor only to miss time from work or family, endure the unpleasantness of medical tests, and pay those surprise lab bills? Put simply, it is for peace of mind. We all want to live long and healthy lives and preventive care is part of the process.
The same applies in business. Dealers want to have well run and healthy operations which stand the test of time. Internal audits are essentially operational and financial blood tests, CAT scans and X-Rays that are designed to detect risks that may not be apparent on the surface. While a dealership may be profitable, there may be operational health risks in underlying areas that are difficult to detect and may show no signs until it is too late.
We have dealers who have annual internal audits and at times their results come back quite positive - no fraudulent activity observed, no major operational or compliance risks detected, no employee self-enrichment, conflicts of interest or avoidable losses. With those positive results, do these dealers then stop having internal audits? Absolutely not.
Because a store is healthy today does not mean it will be that way six months to a year from now – changes in management, departmental staff, economic environment, store culture, internal controls, and processes can adversely impact the health of your dealership over time.
When asked about investing in a healthy lifestyle, buying fitness equipment, running half marathons, seeing my doctor regularly and choosing side salads over French fries, at the end of the day I will often say “it’s still cheaper than heart surgery.” Preventive care is often the best care.