When is the financial statement going to be ready???

I see it every month end, Controllers missing deadlines, stressed out, barely able to get the financial statement and expense analysis completed. Bowing to the demands of the quick close they barely review any of the underlying data before declaring they have the financial statement ready to transmit. Subsequently, since they rushed through month-end they are frequently challenged by the Managers in other departments as to why expenses are ballooning or sales and gross appears to be inaccurate. Controller’s don’t have answers to these questions because in their haste to get it closed, they didn’t spend any time really analyzing these areas and questioning the inconsistencies. Once the Controller has provided the financial statement to the managers/Owner and someone questions either Gross or Expenses; which is usually a pretty obvious mistake, and the controller can’t immediately answer why, what happens? It’s simple, the managers and owner lose confidence in the Controller and the financial data that they desperately need to run the business. The Controller at this point has failed to perform his/her most basic function which is to provide actionable, accurate data to the management of the store so those managers can rely on the data to make decisions. Even worse, inadequate mangers can now hide behind the questionable data and point the attention to the correction of data rather than to the correction of process and performance. This waste of time and resources kills many businesses who spend all their time chasing numbers instead of acting on them.

Controllers must apply three basic principals if they want to avoid this trap.

1. Always Tie to Something
2. Get Ahead of the Curve
3. Always be Confident in your numbers

The first Principal is to Always Tie to Something. I see many controllers prepare a document of chargebacks or Gross and miss the final step. The final and most important step in any financial analysis is that it TIES TO a ACCOUNT Balance on the trial balance. If the analysis doesn’t tie to something then it is just a set of numbers that don’t tell the whole story. This failure to require that level of detail is also the reason that Controllers find themselves caught without the complete answer, it is because they relied on partial data. Controllers have to have a clear tic and tie process for everything they do. When Controller’s require their staff to tie to something – that something being an account balance on the financial statement – surprises and mistakes come out in the process. This allows the staff to make corrections by the very elements of the process and prevents department managers from having to point out inconsistencies in the numbers. An example of this is to have the biller verify that the gross they book on each deal is the same as what came over from Finance and require that any differences be tracked and identified daily to the Controller and the Sales Managers. This puts accountability into the daily process, it makes the process proactive (ahead of the curve), and builds confidence with other managers as you are now having a conversation about the numbers as you go, providing the opportunity to those Managers to challenge your work while it is in process, instead of after it has been presented as fact to the owner.

Get Ahead of the Curve.

First, stop waiting until month end to perform month end. Sounds simple but most controllers don’t do it. Controller’s who monitor gross daily from New/Used cars sales do not spend 2 days chasing gross every month end because the front says it disappeared. Controllers should not be performing schedule reviews on day 1,2,3 of month end, that should be taking place all month long and only the few schedules affected by the frenzy of month end deals and closed RO’s should need to be reviewed on day 2 and 3 – a much more manageable amount of work. Because most Controllers just think they process transactions instead of leading their people in a well established monthly plan their month end begins on the 31st of the month and they pull their hair out each month end. If a Controller plans properly they will get ahead of the “month end” curve so that they are only dealing with the transactions that happen in the last few days of the month and all the other items like reconciliations and reviews were completed several days prior to the last day of the month – now they are controlling the process instead of the process controlling them. By very definition they are now – a Controller. The other element that contributes to getting behind the curve is that controllers don’t try to think like other managers. As a Controller you should always be asking yourself the same questions the other managers are going to ask when they review the data for their department. Accountability is a funny thing. Put accountability on someone for the numbers in their department and all of the sudden any changes in the numbers associated with expenses or gross are highly scrutinized. Add in to the equation that the manager is paid on that Gross or Net and any changes whatsoever to numbers they are tracking will be quickly examined. So when a Controller reviews a trend and sees that gross margins are not within established guidelines or vary greatly from the month before, or clerical expense has increased for the month by $2000 on a $1500 average month expense, it is the Controller’s obligation to question it the same way that the manager will. If a Controller takes this step along with closing the books, they will be prepared to answer the questions as the managers get a chance to review and challenge the data. When a Controller can quickly respond to variations with detailed answers as to why the variation exists – they build confidence in the financials along with themselves to other managers. Too many Controllers don’t understand that when they don’t have confidence to quickly respond to questions regarding Sales data, the collections of CIT, Accounts Receivable or Rebates, then the Owner or GM has no confidence that the Controller has the skills to run the financial part of the business.

That leads to the third and probably most important tenant of my 3 step process for a great Controller. Always be Confident in your Numbers.

If a Controller completes the first two steps – they will be confident in the numbers. The first two steps force you to analyze the numbers as you go and allow you the time to scrutinize them before they are published to the stakeholders. It is because “you always tie to something” that the Controller will be challenging the numbers in the same way as the Manager that he/she has the confidence to speak to the accuracy of the numbers. Once it is established that the numbers are accurate Managers quit having meetings “about the numbers” and start “using the numbers to help drive decisions”. When the shift in attitude towards the numbers happen, Management starts looking to see who isn’t performing up to standard, they start trying to find why they aren’t achieving the correct amount of dollars per RO or hours per ticket. None of this analysis can begin until the Controller delivers accurate data and then demonstrates that they believe in and know the details underlying that data. The most important goal of achieving confidence in the numbers is that it builds the trust needed within the organization. When the Owner/Mangers trust that the Controller knows what is happening with the owners money, in all aspects that trust allows decisions to be made.

That’s what the Automotive Controllers Academy is all about – educating the Automotive Controller on methods that build accuracy and confidence ultimately creating financial leaders for your organization.