The hidden power of financial statements: Why accurate reporting is crucial for dealership growth

By Stephanie Martz

Most dealers can tell you where they rate with customer service and owner loyalty scores. They can share their volume or hours sold as a measure of a successful month.

However, if asked, ‘How would you rate your dealership operationally and financially?’ many dealers cannot confidently rate or grade themselves. 

They may view their financial statement as a mere snapshot of past history, but in reality, it is a key indicator of their business’ future and a key tool for future growth planning.

An accurate and relevant financial statement shows your dealership’s profit opportunities and provides a tool for holding management accountable for results. Externally, your financial statement shows lenders and other partners and stakeholders that you are a well-managed business.  

With the evolution of banking regulations and the consolidation of floor plan lenders, it is crucial for a dealerships to represent clean record keeping, strong internal controls, and financial health to their lenders through a relevant financial statement.

An accurate financial statement helps your dealership by:

• Representing the health of your business
• Exposing potential theft and fraud
• Portraying your financial image to banks, vendors, and partners
• Showing how your dealership is allocating resources
• Presenting operational opportunities
• Helping you calculate manager bonuses
• Providing a sound basis to help you plan for the future

Creating an accurate financial statement

Responsibility for preparing and presenting an accurate and relevant financial statement goes beyond your accounting staff. Accurate transactions begin on the front line -- and well managed dealerships develop processes and provides tools to help the front-line efficiently generate transactions while maintaining a positive customer experience.

For some dealers, that shift of responsibility can be a big culture change. We know most employees are reluctant to change. Upper management should understand the importance of relevant financial reporting and support that effort with their staff.

Dealerships achieve accurate financial statements through defined internal controls, related processes, and accountability.

Accurate financial statements require the following:

• Defined roles and responsibilities in each step of a transaction
• Holding the defined roles accountable to their respective responsibilities
• Segregation of duties and cross-training
• Proper system setups to promote accuracy and efficiency
• Staff training on systems and processes
• Strong transaction cutoffs and deadlines
• Clean accounting schedules and reconciliations

Moving forward

Creating a transparent culture begins with sharing the importance of accurate financial statements with management and staff. Explaining how these statements impact the dealership and its future opportunities helps secure their buy-in.

Once you establish a system for producing relevant and insightful financial statements, your team can identify goals, work collaboratively to achieve them, and celebrate success together.

Stephanie Martz is a manager with Boyer & Ritter and provides accounting, auditing, tax and management consulting services for dealerships. She has nearly three decades of in-house experience in accounting and operations management. Contact Stephanie at 717-761-7210 or smartz@cpabr.com