Dealership financial management plays a crucial role in ensuring success and sustainability. Two key positions at the helm of a dealership’s financial operations are the Chief Financial Officer (CFO) and the Controller. While both roles are essential for dealership financial health, they have distinct responsibilities and focuses. Understanding these differences is essential for comprehensive dealership management (or if you’re considering a career in dealership accounting).
A title does not guarantee skills and experience.
Recently, I had a conversation with a colleague about job titles, which inspired me to write this piece. Early in my career, titles weren’t a priority for me. I was part of a small team that started a dealership – just the owner and about six others. In those days, we were too busy to worry about titles or strictly defined roles. My focus was simply on accomplishing as much as possible each day and guiding others to do the same. While this approach wasn’t ideal for running a dealership, it allowed us to meet our initial goals. As we succeeded, we expanded our team and eventually established a more formal staffing structure.
Now, after years of experience, I’ve come to appreciate the significance of job titles. However, I’ve noticed a concerning trend: titles are often awarded more freely than the skills and experience they should represent.
In the auto world, sometimes titles are like horoscopes—vague, comforting, and only occasionally accurate.
This is particularly evident in the role of ‘controllers.’ Currently, many individuals hold the title of controller without possessing the full range of qualifications traditionally associated with the position. In reality, their responsibilities and skills align more closely with those of an office manager. They typically handle accounting tasks and may have limited experience in staff management, often learning these skills on the job.
This misalignment between title and actual capabilities can lead to confusion, unrealistic expectations, poor financial management….and in some cases, losing the store.
To compound things, there’s a noticeable shortage of true dealership CFOs (Chief Financial Officers). This scarcity is problematic because a successful dealership or group requires more than just the tasks that largely fall under the title of controller. You can likely see where I’m going with this and we need to discuss it because if a store’s controller lacks the necessary skills or experience, and there’s no CFO, the result is pretty ominous, right?
A Chief Financial Officer’s (CFO) role is much more comprehensive than just accounting.
While mastering Generally-Accepted Accounting Principles (GAP) in dealership accounting is essential, it’s merely the foundation for a CFO’s responsibilities.
The true value of a CFO lies in their clarity; their ability to comprehend the bigger picture and to craft financial strategies, support business expansion, and ensure long-term financial stability and growth for the organization.
- If you’re currently a controller performing these high-level tasks, you deserve recognition and potentially a CFO title.
- For dealers, if you have someone demonstrating these capabilities, it’s crucial to retain them through appropriate compensation, recognition, and career development opportunities.
Such individuals are valuable assets and they are as rare as a cat that listens to you. (Although, even if you’re a cat whisperer, chances are the cat is whispering back, “Try harder, human.”)
Unique circumstances have brought the auto retail industry to where we are today.
Automotive retail is one of the most cyclical industries but we’ve had some extreme swings in profitability in the last 5 years. I’m witnessing very thin financial literacy from GMs, controllers and even dealer principals. As retail automotive embarks on a more challenging time retaining profit, my hope is that we can steer things in the right direction.
Whether we’ll succeed is uncertain, and it will require everyone’s involvement, including manufacturers, to work together toward a better understanding of dealership financial statements, key metrics, and overall greater financial literacy.
In today’s post, I will explore the key differences between a dealership CFO and a Controller, their similarities, and how each contributes to the overall success of the dealership.
Key differences between a car dealership CFO and a Controller
Understanding the distinct roles of a dealership CFO and a controller is essential for ensuring effective financial management and strategic direction within the dealership.
Role and Scope
While both positions deal with financial oversight, the CFO focuses on high-level financial strategy, long-term planning, risk management, and aligning the dealership’s financial health with its overall business goals.
In contrast, the controller manages the day-to-day accounting operations, ensuring the accuracy of financial reporting, compliance with regulations, and internal control procedures.
Recognizing these differences enables better role clarity, allowing the dealership to operate efficiently while driving growth and mitigating financial risks.
Dealership CFO (Chief Financial Officer)
- Strategic leadership role
- Strategic focus
- Focus on long-term financial planning and growth
- Oversees all financial activities and reports directly to the dealer principal
Dealership Controller
- Financial management role
- Operational focus
- Manages day-to-day financial operations and accounting practices
- Ensures accuracy in financial reporting and compliance
Strategic Responsibilities of a Dealership CFO
1. Financial Planning and Strategy Development
- Long-term financial planning: The CFO develops financial strategies that align with the dealership’s long-term goals, which may include expansion plans, new service offerings, or technological upgrades.
- Budgeting: They oversee the creation of comprehensive budgets that reflect the strategic aims of the dealership, ensuring funds are allocated effectively across departments.
2. Investment and Capital Management
- Capital investment decisions: CFOs evaluate potential investments in new facilities, technology, or inventory. Their role is to assess the financial viability and potential return on investment of such capital expenditures.
- Financing strategies: They manage the mix of debt, equity, and internal financing used to fund the dealership’s operations and growth, negotiating with banks and other financial institutions to secure favorable terms.
3. Risk Management and Mitigation
- Identifying financial risks: Part of their strategic role involves identifying potential financial risks to the dealership, such as economic downturns, changing market dynamics, or regulatory changes.
- Developing mitigation strategies: They devise strategies to mitigate these risks, which might include diversifying revenue streams, adjusting pricing strategies, or enhancing operational efficiencies.
4. Performance Monitoring and Enhancement
- Financial reporting and analysis: CFOs ensure the preparation of accurate financial reports that provide insight into the dealership’s performance. They use these reports to track progress against strategic goals and make adjustments as needed.
- Operational performance enhancement: By analyzing financial and operational data, they identify areas for cost reduction and efficiency improvements, often working closely with department heads.
5. Leadership and Advisory
- Guiding senior management: As part of the executive team, CFOs advise the dealer principal and other senior leaders on financial planning, risk management, and key investment decisions.
- Stakeholder relations: They manage relationships with external stakeholders such as investors, banks, and vendors, ensuring that the dealership’s financial strategies are transparent and well-received.
6. Regulatory Compliance and Ethical Governance
- Ensuring compliance: The CFO ensures that the dealership adheres to financial regulations and tax laws, which includes overseeing all types of audits and maintaining proper financial records.
- Promoting ethical financial practices: They uphold the highest standards of integrity and transparency in financial reporting and operations.
These strategic responsibilities highlight the CFO’s role as not just a guardian of the dealership’s finances but as a strategic partner in its growth and development.
Key Responsibilities of a Dealership Controller
A controller is central to the day-to-day financial management of a business, playing a critical role in maintaining the financial health and operational efficiency of the organization. Here’s a detailed look at the typical responsibilities and functions of a controller.
1. Financial Reporting
- Daily and Monthly Reports: A controller ensures timely preparation and accuracy of financial reporting, including monthly dealership financial statements. This involves daily updates to track financial activities accurately.
- Financial Analysis: Regular analysis of financial data to identify trends, forecast future financial status, and provide actionable insights to management.
2. Accounting and Bookkeeping
- Maintaining Accounting Records: Controllers oversee the accuracy of all accounting entries and financial documents, including schedules, journals, and invoices.
- Reconciliation: Ensuring that all business accounts, such as bank accounts, are reconciled regularly to prevent discrepancies in financial reporting and dealership financial health.
3. Budget Management
- Budget Monitoring: Controllers play a crucial role in budget management by regularly monitor expenditures against the budget to manage financial resources effectively.
- Cost Control: They identify areas of overspending, suggest cost-reduction strategies, and enforce financial policies to maintain budgetary compliance.
4. Regulatory Compliance and Auditing
- Compliance: Controllers ensure that the business adheres to all relevant financial regulations and standards, reducing the risk of legal or financial penalties.
- Internal Audits: They often oversee internal audits to assess financial procedures and compliance, identifying areas for improvement in financial practices.
5. Cash Management
- Cash Flow Monitoring: Controllers manage daily cash flow to ensure sufficient liquidity for operational needs. This includes monitoring incoming receipts and outgoing payments.
- Financial Negotiations: Handling negotiations with banks and other financial institutions for favorable terms on overdrafts and loans.
6. Payroll and Transactions
- Payroll Oversight: Ensuring that payroll is processed accurately and on time, including the management of taxes and benefits.
- Transaction Management: Overseeing all financial transactions, including sales, purchases, and investments, to ensure they are correctly recorded and authorized.
Comparison of key differences between a dealership CFO and Controller
While both roles are critical to a dealership’s financial management, several key differences set them apart:
- Strategic vs. Operational Focus: The CFO’s role is more strategic, focusing on long-term financial planning and high-level decision-making. The Controller’s role is more operational, concentrating on day-to-day financial management and reporting.
- External vs. Internal Orientation: CFOs often deal with external stakeholders such as banks, investors, and strategic partners. Controllers primarily focus on internal financial processes and reporting.
- Forward-Looking vs. Historical: CFOs spend more time on forward-looking activities like financial forecasting and strategic planning. Controllers typically focus more on recording and reporting historical financial data.
- Breadth vs. Depth: CFOs need a broad understanding of all aspects of the business and how they impact financial performance. Controllers require deep expertise in dealership-specific accounting principles, processes, and regulations.
- Decision-Making Authority: CFOs generally have more authority in making financial decisions that impact the entire dealership. Controllers typically make decisions within the scope of accounting operations and financial reporting.
Similarities between a dealership CFO and Controller
Despite their differences, CFOs and Controllers share some common ground:
- Financial Expertise: Both roles require a strong foundation in finance and accounting principles.
- Analytical Skills: CFOs and Controllers must be adept at analyzing financial data to draw meaningful insights.
- Integrity and Ethics: Both positions demand a high level of integrity and ethical behavior in handling financial information and making decisions.
- Technology Proficiency: As dealerships increasingly rely on financial software and data analytics, both roles require comfort with technology.
- Leadership: CFOs and Controllers both lead teams and must possess strong management and communication skills.
How each role contributes to dealership success
The CFO and Controller each play vital roles in ensuring the dealership’s financial health and overall success:
CFO’s Contribution:
- Guides strategic financial decisions that drive growth and profitability
- Ensures the dealership has the necessary capital to fund operations and expansion
- Identifies opportunities for cost savings and revenue enhancement
- Manages relationships with key financial partners and stakeholders
- Provides financial leadership during mergers, acquisitions, or major business changes
Controller’s Contribution:
- Ensures the accuracy and timeliness of financial reporting, enabling informed decision-making
- Maintains strong internal controls to protect assets and prevent fraud
- Manages cash flow to meet day-to-day operational needs
- Ensures tax compliance and minimizes tax liabilities
- Provides detailed financial analysis to support operational improvements
The Bottom Line
While the roles of CFO and Controller in a dealership may overlap in some areas, they are distinct positions that complement each other in managing the dealership’s financial operations. The CFO takes a high-level, strategic approach to financial management, while the Controller ensures the day-to-day financial operations run smoothly and accurately. Together, they form a powerful team that drives financial stability, supports informed decision-making, and contributes significantly to the overall success of the dealership.
In smaller dealerships, these roles might be combined or one person might wear both hats. However, as dealerships grow and financial complexity increases, having both a CFO and a Controller becomes increasingly important. By understanding the unique value each role brings, dealership owners can ensure they have the right financial leadership in place to navigate challenges and capitalize on opportunities in the ever-evolving automotive retail landscape.
Is an On-Demand Dealership CFO right for you? Let’s talk!