To Know Where You Are Going, You Need to Know Where You Stand.
By Luis Deville
Numbers are the language of business. Numbers are mainly used to count, measure and label. Dealers and store managers use numbers produced by their operations every day to measure their performance, set goals, and keep track of business transactions. Therefore, it is vital that accounting records are up-to-date and accurate as a basis for business decisions and forward-looking initiatives. Accounting is the foundation of business decisions. If your dealership’s financial records are not up-to-date, accurate and complete, then neither will your sales projections and related expense calculations, for example, be correct. In order to make good strategic decisions, you need to use financial data from General Ledgers that are reliable.
One way to ensure your numbers are reliable is to start with the right staff in your accounting department. The right staff means they have knowledge about proper accounting and there are enough staff members to complete monthly duties. With sufficient staff and proper leadership, this helps ensure that transactions are being recorded in the ledgers correctly and on-time. All too often we find dealers limiting administrative headcount to reduce their expenses only to discover their understaffing was significantly more costly due to unnecessary write offs and decisions made upon inaccurate financial data. Having the right staff will increase the accuracy and completeness of the numbers you use to make strategic decisions. Year-end financial statement audits and reviews are often viewed as a “catch all” to detect and correct reporting errors made throughout the year. However, these audits and reviews have materiality constraints, and by the time the audit is complete, it is often too late to change the decisions which were made based on inaccurate data during the prior year.
We recommend internal audits and review procedures throughout the year, including regular and detailed analysis of your dealership’s trial balance, schedules and supporting ledgers. These processes can help you gauge how reliable the data you are using is and whether you have the right staff in the right position, or if you need more employees before it is too late.
We realize that accounting primarily deals with recording what has already happened. However, in order to move forward you must look at the past to get an understanding of what has led you to where you currently are, so you can achieve greater clarity to get your operation to where you want to be.