Back-Office Consolidation for Multi-Location Dealer Groups

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1 Back-Office Consolidation for Multi-Location Dealer Groups October 30, 2014 Presented By: Jodi Kippe, CPA and Kara Perkins, CPA

2 Contact Information Jodi L. Kippe, CPA Partner Fort Lauderdale, Florida Jodi Kippe is a Partner with Crowe Horwath LLP, a top ten public accounting and consulting firm. Ms. Kippe is a CPA with more than 28 years experience working exclusively with Crowe s Retail Dealer clients. Ms. Kippe provides audit, risk, financial advisory, and performance profitability services and manages the relationships for many of Crowe s largest dealership groups. She has lectured at NADA and AICPA conferences, as well as other automotive and state associations. She is a published writer, with articles featured in trade magazines, periodicals, and business journals. Ms. Kippe is the recipient of Florida Institute of CPA s Women to Watch Experienced Leader award and Women s Automotive Association International Spirit of Leadership award. jodi.kippe@crowehorwath.com Phone: Crowe Horwath LLP 2

3 Contact Information Kara Perkins, CPA Senior Manager Fort Lauderdale, Florida Kara Perkins is a senior manager at Crowe Horwath LLP, working exclusively in the Retail Dealers group. Kara has 11 years of public accounting experience providing assurance and financial advisory services to retail dealerships across the country. She has designed, supervised, and managed various accounting projects, audits and reviews and performed internal controls/compliance testing projects with privately held dealership groups. Kara also consults on accounting and operational processes that enhance dealerships daily operations. kara.perkins@crowehorwath.com Phone: Crowe Horwath LLP 3

4 Topics to be Covered The Benefits of a Consolidated Accounting Office Is a Consolidated Accounting Office Right for You? How to Get Started Lessons Learned Centralized Accounting Office Metrics 2014 Crowe Horwath LLP 4

5 The Benefits of a Consolidated Accounting Office

6 Benefits Cost savings Greater effectiveness and efficiency Opportunity to attract, develop, and maintain a more talented staff Ability to create career path Cross-training More direct control over the various reporting and compliance issues Streamlined technology including systems and processes throughout locations Consistent policies and procedures, simplifies consolidated reporting, and creates efficiencies in the internal audit function Stronger internal controls with more effective segregation of duties Faster closings and reporting to manufacturers and stakeholders Reflects positively in potential future M&A activity 2014 Crowe Horwath LLP 6

7 Is a Consolidated Accounting Office Right for You? Solid Starters Basic Information to Build Business Plan, Research and Due Diligence

Solid Starters Basic Information to Build Business Plan Number of dealerships Location of dealerships (high or low volume, clustered or outlaying) Employees Experience, strengths and capacity

8 Solid Starters Basic Information to Build Business Plan Number of dealerships Location of dealerships (high or low volume, clustered or outlaying) Employees Experience, strengths and capacity (leadership quality?) Ratio of total employees per one accounting employee Cost structure Culture Ownership structure Current organizational chart and job functions Current processes, technologies and system(s) 2014 Crowe Horwath LLP 8

9 Research and Due Diligence Consult with your 20 Groups, CPA firms and other industry specialists Conduct phone surveys of multiple dealership groups Select dealer groups for on-site visit Physically observe the accounting office Interview key personnel Identify successes experienced Identify their hurdles Understand organizational, structural and cultural factors unique to your group Understand that one-size does not fit all Using basic information obtained in initial phase, determine what pieces of the various models researched can be combined to create the right model for you 2014 Crowe Horwath LLP 9

10 How to Get Started Practical Considerations Plan for the Hurdles Timeline for Conversion

11 Practical Considerations Assembling the right team Location of centralized account office Determining what functions to consolidate Selecting technology and system(s) Document transport, security and retainage Use scanners, econtracting Designing new policies and procedures for accounting office as well as on-site at the dealership Redesigning the organizational chart for the centralized office and dealerships Responsible for specific stores Responsible for specific areas or functions 2014 Crowe Horwath LLP 11

Sample Structure of Centralized Accounting Office Corporate

Accounting Manager Accounts Payable Lead Accounts Receivable

Receivable Clerk Service/Parts/BS Receivables Clerk Payroll

12 Sample Structure of Centralized Accounting Office Corporate Controller Consolidated Accounting Manager Consolidated Accounting Manager Accounts Payable Lead Accounts Receivable Lead Payroll Lead Billing Lead AP Clerk AP Clerk Factory Receivable Clerk Service/Parts/BS Receivables Clerk Payroll Admin/Benefits Clerk Billing Clerk Title Clerk 2014 Crowe Horwath LLP 12

13 Plan for the Hurdles Anticipate push-back Dealer buy-in is critical Culture shifting Logistical challenges Changing roles for accounting personnel Develop detail job descriptions Map out the processes System streamlining Chart of accounts Accountability is the key!!! 2014 Crowe Horwath LLP 13

14 Timeline for Conversion Phase-in approach Start with certain functions Start with certain regions One dealership at a time All-in approach Develop timeline Set mile-stones Monitor progress 2014 Crowe Horwath LLP 14

15 Lessons Learned A Walk Through the Functions Overcoming Challenges Reporting

16 A Walk Through the Functions Billing RDR function performed at dealership Review and sign-off of deal jackets Preparation and submission of funding package Address differences between F&I gross and Accounting gross Cutoff Accounts Payable and Cash Disbursements Demand checks PO s and invoices Wire transfers Vendor payments with credit cards 2014 Crowe Horwath LLP 16

17 A Walk Through the Functions (Continued) Cash and Banking Daily bank reconciliations Separate account for wires Remote deposit banking features Checks image scanning Cash armored service Payroll Document pay plans Standard template with ability to customize Approved by CFO or Dealer 2014 Crowe Horwath LLP 17

18 Overcoming Challenges Continuous communication to maintain buy-in and support Put in place various channels so that GM s are connected to the accounting office (inperson meetings, , shared drives or databases, video conferencing) Dedicated resource(s) Implement consistent processes and technology Structure Transition from a particular store to a team setting focused by function Consolidated Accounting Managers are assigned to multiple stores Brand Region or Division, Cluster or Outlaying General Manager Typical roles left at the dealership are receptionist, cashier, warranty clerk and title clerk; if state requirement Chart of accounts Designed for flexibility and growth Manage to the timeline 2014 Crowe Horwath LLP 18

19 Reporting Daily Cash management, outstanding deals, aged CIT and vehicle receivables, DOC Weekly Sales log, F&I variance log, aged receivables Monthly DOC, dealer financial statement, group comparison analyses, actual to budget comparison analyses, various sales reports, CSI reports, fixed absorption report Other Month end close 3 to 5 days General Managers approve all expenses and month end numbers before finalizing 2014 Crowe Horwath LLP 19

20 Centralized Accounting Office Metrics

21 Centralized Accounting Office Metrics # of deals per month billing clerk # of titles per month title clerk Ratio of all dealership personnel to accounting personnel Ratio of managers/supervisors to clerks in the accounting office Other 2014 Crowe Horwath LLP 21

22 Questions? 2014 Crowe Horwath LLP 22

23 For more information, contact: Jodi Kippe, Partner Crowe Horwath LLP - Retail Dealer Group Direct Mobile jodi.kippe@crowehorwath.com Kara Perkins, Senior Manager Crowe Horwath LLP - Retail Dealer Group Direct Mobile kara.perkins@crowehorwath.com Crowe Horwath LLP is an independent member of Crowe Horwath International, a Swiss verein. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by Crowe Chizek LLP, which is not a member of Crowe Horwath International Crowe Horwath LLP 2014 Crowe Horwath LLP 23

With Jodi Kippe, CPA & Partner Retail Dealer Practice at Crowe Horwath LLP. Moderated by Mike Bowers, Executive Editor at DealersEdge

With Jodi Kippe, CPA & Partner Retail Dealer Practice at Crowe Horwath LLP. Moderated by Mike Bowers, Executive Editor at DealersEdge How to Identify and Stop Internal Theft in the Dealership! Failing to be alert for employee schemes to embezzle or otherwise steal from the dealership can be not only costly - It's embarrassing! With Jodi