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Take a hard look before adding a financial executive

April 21, 2016

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Do you think your dealership is large enough for — and can afford hiring — an executive to direct your financial operations? Before contacting your industry connections for candidate suggestions or lining up a headhunter, carefully consider what goes into making this move.

Size matters

Dealerships usually need to reach a minimum size before it’s financially feasible for them to hire a financial exec. Generally, two thresholds exist: 1) If your business has revenues of around $75 million, or you operate multiple smaller stores, you may be ready to hire a controller, and 2) if you have revenues of around $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 is the ability of this kind of professional to bring a higher level of strategic and analytical skills to the financial management of your dealership; 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 will be able to go beyond merely compiling financial data to providing an interpretation of the data that shows how financial decisions will impact all areas of the dealership. And 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 help negotiate any loans. Analyzing possible merger, acquisition and other expansion opportunities also falls within a CFO’s or controller’s purview.

Other benefits

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, and
  • 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.

Time and money

Hiring a full-time CFO or controller represents a major commitment in 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 will require a time commitment by the ownership and the existing 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 exec isn’t granted enough decision-making authority afterward, this person could become bored and leave your employ — 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.

© 2016


 

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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