Do You Know What Your Controller Isn’t Doing?
Recently, I was speaking with a dealer about issues related to his accounting office, and he asked me, “How do I know my controller is doing the job I hired her for?” Without giving away details of that specific conversation let me share some of the key points of that conversation. The first was to ask the dealer if he had a job description for his controller? Yes, he had one that he had picked up somewhere along the way, likely from NADA by the way it read.
So I asked the dealer if he understood everything on that job description and for the most part he had a good understanding of what was on the description. Then I asked do you know what it takes to execute those items on the description. That was where the conversation changed because although he knew the end result of several of the items in the job description – like prepare factory financial statements or process dealership-wide payroll, he really had no idea as to the steps or processes involved in getting those items done or what would indicate a job well done. He didn’t know how to inspect what he expected.
That’s when I took him on a short journey. Let’s use the payroll example for a moment. How do you know if payroll is being done properly? Some would simply say that everyone received a paycheck on time so it must be being done properly. I would say, just because employees are getting paychecks and not complaining about them being wrong doesn’t prove that your controller is processing payroll correctly. Let’s see how many things might not be done in this process.
- Your employee gross wages are not being allocated to the proper expense accounts. – Creates inaccurate financial data.
- Your payroll tax returns are not filed timely. – Creates a problem for your dealership.
- Your payroll taxes are not being paid timely. – Creates a tax liability and penalty issue for the dealership.
- Employee garnishments are not being set up and deducted in a timely manner. – Creates a liability for the dealership.
- Employee portions of benefits are not deducted from employee checks. – Added expense for the dealership.
- Benefit accounts are not reconciled. – Added expense for the dealership as you can’t collect from terminated employees.
- WIP is not being reconciled. – Gross profits are overstated.
- Salaries and wages payable are not being reconciled. – Added expense for the dealership because most often the case is an employee has been terminated and final wages have not been expenses properly
- Employees are not being enrolled in benefits in a timely manner. – Liability for coverages that should have been in place but weren’t.
- Bank reconciliation is not being done in a timely manner. – Added expense when a rogue employee deposits a check once on mobile and once at the bank and it’s not caught until months later when someone gets to a bank reconciliation.
That’s just 10 things that might not be done, but every employee has a paycheck on time. This is just one of many things in the accounting office that I could have used as an example for this dealer. The accounting office is a complex operation that needs checks and balances in it and part of that checks and balances process is for the dealer to know what questions to ask, and where to look in their DMS to spot check to make sure the controller is doing the job they were hired to do.
If you know what you are looking for it doesn’t take long to answer the question of is my controller doing the job I hired them to or not.