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Is your company ready to bring on a CFO or controller?

CFO

By Patrick Reilly, Principal of Audit

Bringing on a CFO or a controller to handle the financial operations at an auto dealership is a big decision, and there a number of factors that management must consider, including the dealership’s size, the benefits of the hire and the time and money involved in such a commitment.

Take a hard look before hiring a financial executive. Do you think your dealership is large enough for — and can afford to hire — an executive to direct your financial operations? Before contacting your industry connections for candidate suggestions or lining up a headhunter, here are some things to carefully consider before making your move.

Growth

Is your current structure impeding growth? There is no magic number that your dealerships need to reach before it’s financially feasible to hire a financial executive, but generally, a good rule of thumb is that if your business has revenue of about $75 million, or you operate multiple smaller stores, you may be ready to hire a controller, or if you have revenue of about $300 million and run multiple locations, it may be time to hire a CFO.

If your dealership has already met one of these thresholds, or soon will, hiring a financial executive can have significant benefits, perhaps the biggest of which is the ability of this professional to bring a higher level of strategic and analytical skills to the financial management of your dealership. And those skills go far beyond basic number crunching.

The strategic direction that a CFO or controller can bring to the game includes looking beyond day-to-day financial management to more holistic, big-picture planning of financial and operational goals. This individual will take a seat at the executive table and serve as the owner’s go-to person for all matters related to dealership finances and operations.

Interpreting data

A CFO or controller goes beyond merely compiling financial data to providing an interpretation of the data that shows how financial decisions will impact all areas of the dealership. He or she can plan capital acquisition strategies so your dealership has access to financing as needed to meet working capital and operating expenses.

In addition, a CFO or controller will serve as the primary liaison between your dealership and its bank to ensure your financial statements meet the bank’s requirements and will help negotiate loans. Analyzing possible mergers, acquisitions and other expansion opportunities also fall within a CFO’s or controller’s purview.

Financial oversight

A CFO or controller typically has a set of core responsibilities that link to the financial oversight of your operation. That includes making sure there are adequate internal controls to help safeguard the dealership from internal fraud and embezzlement. This individual also should be able to:

  • Implement improved cash management practices that will boost the dealership’s cash flow and improve budgeting and cash forecasting
  • Perform ratio analysis and compare the dealership’s financial performance to benchmarks established by similar-size dealerships in the same geographic area
  • Analyze the tax and cash flow implications of different capital acquisition strategies, for example, leasing vs. buying equipment and real estate

If you have multiple franchise locations, a CFO or controller can analyze and compare the different operations from a financial perspective and look for ways that your business can benefit from economies of scale.

Other benefits

A CFO or controller should play a key role in the dealership’s compliance and regulatory issues, such as:

  • Develop and implement policies and procedures for the accounting department
  • Ensure all company policies and procedures are being followed both fairly and consistently
  • Evaluate, hire and monitor key personnel positions, including office managers, HR and IT
  • Maintain record-filing procedures for all federal and state regulations

Time and money

Hiring a full-time CFO or controller represents a major commitment of both money and time. This executive likely will command a six-figure salary and an attractive benefits package, so first make sure your dealership has the financial resources to support this level of compensation.

Bringing in a financial executive also requires a time commitment by ownership and the management team. They’ll have to bring the CFO or controller up to speed on all aspects of the dealership’s finances and operations. If this training doesn’t go well, or the new executive isn’t granted enough decision-making authority afterward, this person could become bored and leave — wasting your efforts and disrupting the business.

Weighing the alternatives

Hiring a CFO or controller may be the right decision if your dealership is large enough and has the cash flow to support the requisite compensation. However, if you’re reluctant to take this step but still seek improved financial oversight, your CPA, together with your existing financial staff, can supervise the outsourcing of these higher-level responsibilities.

Seek the services of a legal or tax adviser before implementing any ideas contained in this blog. To reach a financial advisor at Lane Gorman Trubitt PLLC, call (214) 871-7500 or email askus@lgt-cpa.com.