As dealership groups adapt to a changing market, many are exploring the benefits of centralizing their business office functions. A well-planned centralization strategy can improve efficiency and financial controls while lowering costs. However, this transition requires careful evaluation to make sure it aligns with operational goals and dealer network structure.
Centralized Accounting Model for Dealerships
Dealership groups often operate their stores and locations using a centralized model, a decentralized model, or a hybrid version of the two.
From an accounting standpoint, a centralized model typically means that there are finance and accounting professionals that work at a central location—often on-site at the headquarters—and carry out the vast majority of the financial reporting and accounting functions for all dealership locations. In a decentralized model, each location has its own accounting team with more decision making to ascertain how their financial information is recorded and reported, and the data collected among locations may be different. Hybrid models may have a few processes, reports, and controls that are designated by the central office, with a mix of other data and reports that are up to the individual store or location.
We see the greatest variety among automotive dealerships when it comes to choosing centralized, decentralized, or hybrid accounting models. In the commercial truck and machinery and equipment spaces, however, dealers tend to operate in a centralized environment.
What Are the Pros & Cons of a Centralized Accounting Model?
Below are key considerations and potential challenges to keep in mind when thinking of a centralized accounting model for your dealership.
Key Considerations
Cost Efficiency – Would consolidating accounting functions across multiple locations reduce overhead while improving efficiency? Many dealership groups have successfully lowered costs by eliminating redundant roles and leveraging shared services, but the savings ultimately depend on scale and execution.
Technology & Infrastructure – Does your Dealer Management System (DMS) support a centralized accounting model? Upgrading or integrating systems may be necessary to help with seamless data flow, remote accessibility, and cybersecurity compliance.
Process Standardization – How consistent are your accounting practices across locations? A centralized approach operates more effectively with similar policies, streamlined reporting, and standardized procedures to increase accuracy and compliance.
Talent Management – Will key employees adapt to a centralized structure, or will restructuring lead to talent loss? Retaining experienced personnel and operating through change effectively is critical to maintaining continuity and institutional knowledge.
Regulatory & Tax Implications – How will centralization affect multistate tax compliance and regulatory requirements? Consider sales tax filings, licensing obligations, and audit processes when considering the feasibility of centralization.
Increased Control Environment & Fraud Prevention – Would centralizing accounting functions strengthen your internal controls and reduce fraud risk? A centralized office may allow for greater oversight, segregation of duties, and standardized approval processes, helping to reduce the changes of unauthorized transactions, cash discrepancies, and employee fraud.
Challenges & Hurdles
Implementation Disruptions – What is the expected transition timeline, and how will it affect daily operations? A phased approach can help decrease disruptions, but planning is key to a smooth rollout.
Resistance to Change – How will dealership-level teams respond to the shift? Strong leadership, clear communication, and defined roles can help ease concerns and drive adoption.
Data Security & Access – How will sensitive financial data be overseen across multiple locations? Controlling access while maintaining security protocols is essential to reducing the risk of fraud and data breaches.
Customer Experience Impact – Will centralization slow down dealership-level processes, such as deal funding and vendor payments? A structured support model must make certain that frontline operations remain responsive and efficient.
Conclusion
Successfully centralizing a business office requires strategic planning and guidance from experienced professionals. Our team at Forvis Mazars helps dealership groups navigate this transition and find a balance between efficiency, control, and operational effectiveness. We welcome the opportunity to discuss your specific needs and tailor our services to align with your business objectives.
Please reach out to explore how we can support your centralization strategy.