I’ve been noticing something for several months now and it’s not something that’s readily apparent, even to car people. This observation is partly due to my never ending love of talking about the car business and its operating strategies but you don’t have to be a car business geek to know that dealership accounting skills, and specifically dealership controllers are uber-important to the success of the organization.
I spend a lot of time within dealership operations, and while many people know me from the automotive digital marketing space, I felt the calling again to leverage my dealership experience to work with dealership clients on their financial and operational processes.
The growing shortage of qualified dealership controllers.
A surprising fact about me is that I like to clean up accounting and set dealers up for the best financial outcomes possible. In the last year, I’ve witnessed a severe decline in overall dealership accounting skills and a lack of qualified dealership controllers, which has been the cause of some shockingly negative results.
Last week, I was chatting with an esteemed colleague, an automotive CPA, and we agreed that there’s a growing concern within the industry. He said:
The shortage in qualified controllers is the next great crisis. We will be talking about it like techs soon…not sure why we aren’t already.
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As most dealers and managers know, for several years, dealership technicians have been very hard to come by. But what about the controllers and office staff who handle all the money? Those skills are even harder to come by. There is no place to go to learn how to run a dealership’s financial center. In fact, it could be argued that learning accounting in college would hinder someone looking to enter the car dealership accounting world. (I’ve trained people in this scenario and it’s been true in many cases).
Yes, the traditional accounting debits and credits structure still applies, but mastering dealership accounting requires an understanding of how the dealership itself runs. The higher up the chain you go, the greater the need is to possess an ability to track a number back to the operations, behaviors and decisions that caused it…and then put that number in its rightful place.
The dealership CPA’s advisory role in dealership accounting.
In the late 90s, I worked for a very diversified dealer who not only owned dealerships but also many other businesses. His prestigious Big-Four accounting firm would visit us to gather information to file the tax returns. I spent a good sum of time with them explaining how car deals work, how service and parts work, how revenue flows into the accounting office and how it’s accounted for. When they left, I think they had at least a Master’s degree in dealership accounting operations! LOL.
That scenario is not as uncommon as you might think. If you look at things strategically, there are responsibilities the CPA has and responsibilities the dealership controller has, that when the two converge should cover the dealership’s entire financial ecosystem. Given the scarcity in dealership accounting skills at the dealership level and the shortage of dealership operations knowledge at the CPA level, this can present a perfect storm where components of the financial ecosystem are at risk. Results can manifest as lower revenue, higher expenses, uncollected receivables, all the way up to employee theft, regulatory non-compliance and legal issues.
Many dealers assume that their CPA will “catch” all accounting errors and omissions as well as any process/workflow issues via their quarterly visits. This is a common misperception and it’s not what actually takes place. Generally speaking, dealership CPAs request specific reports and reconciliations as they go through their process to generate the dealership’s tax returns. Some will go further into the dealership’s books in order to substantiate the reporting so they can confidently prepare and file the dealership tax returns. But not every dealership CPA offers or performs this deeper dive, and even a deeper dive is not guaranteed to tell the entire story.
The fact is that there can be (and I’ve seen so, so many) a myriad of mistakes (and worse) that have managed to survive years of CPA reviews. Mistakes (and worse) that lead to millions of dollars lost.
Car dealership accounting skills don’t grow on trees.
Most people in dealership accounting positions are either self-taught or had a mentor to help them progress in their knowledge. Some have been lucky to have both.
My grandfather was a dealer in Downtown Los Angeles in the 1960’s. He was a minority owner and was also the CFO. I’ve sort of followed his footsteps (without trying) in that I have the operations experience (as a dealer/executive manager) but also the financial background (as a CFO). No one is more aware than me how unique my background is. I used to view it like a curse because I could literally see things that others missed and naively let them know what I saw, only to be met with negative responses. But as my confidence grew, I realized it’s a positive gift and over the years I’ve made huge efforts to share my knowledge with staff and others who wanted to enhance their skills.
I feel strongly about every dealership setting themselves up to be as profitable as possible and to do that requires a skilled controller or CFO who is a partner to the dealer. Another colleague of mine once said,
The strongest, most successful stores are where the owner and the CFO are a partnership, united in their policies and vision.
As my colleague mentioned earlier, I’m not sure why we aren’t talking about the shortage of qualified controllers, but it’s definitely time to start.
The Growing Challenge: Scarcity of Experienced Dealership Controllers in the Auto Industry
In recent years, the auto industry has faced a myriad of challenges, from supply chain disruptions to shifts towards electric vehicles. However, one issue that has quietly been growing in the background, affecting the operational integrity of franchise car dealerships, is the diminishing availability of experienced dealership controllers.
This pivotal role, central to the financial and administrative success of dealerships, is becoming increasingly difficult to fill with qualified candidates. Let’s explore the roots of this challenge, its implications, and potential strategies for addressing it.
Understanding the Role of Dealership Controllers
Dealership controllers and CFOs, often considered the financial backbone of automotive dealerships, are responsible for managing financial statements, compliance, cash flow, and overall dealership accounting practices. Their expertise not only ensures the dealership operates within financial and legal guidelines but also strategizes for profitability and sustainability. As the automotive industry becomes more complex with digital transformation and evolving business models, the role of the controller has become even more critical.
The Core Challenges
Several factors contribute to the diminishing pool of experienced dealership controllers:
- Industry Evolution: The recent rapid evolution of the automotive industry, including the adoption of new technologies and business models (such as subscription services and online sales), has expanded the skill set required for dealership controllers. Keeping pace with these changes requires continuous learning and adaptability, traits that are hard to find and develop.
- Generational Shifts: There’s a noticeable generational shift in the workforce, with the majority of dealership employees above age 40, with a significant proportion in the 50+ age range, and younger generations showing less interest in car dealership careers. The specific demands of the dealership controller role, which blend rigorous financial acumen with an understanding of automotive operations, are less appealing to many in the younger talent pool, who often seek careers in industries perceived as more innovative or impactful.
- Competition for Talent: The financial skill set of dealership controllers is highly transferable, making these professionals attractive to a wide range of industries. With the rise of fintech, e-commerce, and other sectors offering competitive salaries, flexible work environments, and rapid career progression, the auto industry finds itself in a fierce battle for these financial experts.
Navigating the Challenge
To address the scarcity of experienced dealership controllers, the industry needs to adopt a multifaceted approach:
- Enhance Training and Development:
- Dealerships, in partnership with manufacturers, industry associations and educational institutions, should invest in targeted training programs. These programs could focus on the unique aspects of dealership financial management. Certainly, the “meat and potatoes” skills that have always been required (and that I see are fading into the distance) but also the emerging automotive business models, and technological advancements, catering specifically to the evolving role of dealership controllers.
- In the Development sense, highly specialized expertise in the form of advisors, former mentors and CFOs would be beneficial in providing upskilling, proven workflows/systems and regular assessments to ensure ongoing proficiency and progress.
- Improve Recruitment Strategies: To attract a broader talent pool, dealerships need to innovate their recruitment strategies. This might include offering internships and apprenticeships to younger individuals, showcasing the technological advancement and innovation within dealership financials, and highlighting career growth opportunities within the accounting office.
- Foster a Positive Work Environment: Enhancing work-life balance, offering competitive compensation packages, and creating a supportive workplace culture can make dealership accounting positions more attractive.
- Leverage Technology: Automating routine tasks and leveraging financial technologies can reduce the workload on dealership controllers, allowing them to focus on strategic initiatives. This not only makes the role more appealing but also increases operational efficiency within the dealership.
The time to act is now.
The diminishing availability of experienced dealership controllers poses a significant challenge for the auto industry. However, by understanding the roots of this issue and implementing strategic measures to attract and retain talent, the industry has the opportunity to navigate this challenge effectively.
The key lies in recognizing the evolving nature of the dealership controller role and adapting to the changing landscape of automotive retail. By doing so, dealerships can secure their financials, maximize profits, minimize risks, while keeping the factory and lenders happy and satisfied.
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