Click through our dealership planning resources and take your team beyond the status quo.

 

One of the 5 Elements of Effective Accountability Management is to "Plan Your Work, and Work Your Plan." We first need to establish and review the necessary planning cycles or planning periods. GH&A recommends the following:

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• Long-Range Planning

  • SWOT Analysis

  • 3-5 Year Business Plan

  • Annual Budgeting Process

• Short-Range Planning

  • Quarterly Forecasting and Review

  • Monthly Forecasting and Review

 

For purposes of these discussion, we will refer to business “budgeting” as an estimate or prediction of future (one year or longer) developments in business such as sales, expenses, and profits. Given the wide swings in economic activity and the drastic effects these fluctuations can have on profit margins, it is not surprising that business budgeting has emerged as one of the most important aspects of dealership planning. Budgeting has become an invaluable tool for businesspeople to anticipate economic trends and prepare themselves either to benefit from or to counteract them. If, for instance, an auto dealer envisions an economic downturn, he can cut back on his inventories, his headcount, and certain other areas of expense. If, on the contrary, an economic boom seems probable, the same auto dealer can take necessary measures to attain the maximum benefit from it. Good business budgets can help dealerships and managers make wise decisions on resource applications when effectively adapting to a changing economy and a changing industry.

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At a minimum, dealers now need annual budgets. Many dealers, and most dealer groups, develop longer term (3 – 5 years) budgets to better foresee their growth and resource needs. Many experts agree that precise automotive retail industry budgeting is as much an art as a science. Because, as we’ve recently learned, industry business cycles are not repetitious, a good budget may result as much from experience, sound instincts, and good judgment as from anything else. Nevertheless, a “budget” is pretty much, in our business, a view into “the crystal ball”, attempting to predict the long-term outcome of our dealership success. Accumulating a series of short-term successes will result in long-term success. We therefore need to focus heavily on the immediate future (the next 90-days, next month, or even next week) in order to maximize our short-term success. Therefore, in this discussion, we’ll refer to this process as “forecasting”.

   

Automotive retail industry forecasting uses historical data to try to predict future events. This data might include the “same period last year,” or “the most recent 90-days,” or “last month,” or a combination of all three periods. In any event, the forecasting process must begin with documenting and understanding “where we’ve been;” we cannot possibly determine “where we’re going” until we accurately answer the first question. Forecasting is intended to be far more accurate that budgeting.

 

We now understand the importance of, and difference between “budgeting” and “forecasting”. For this discussion we will concentrate on monthly forecasting, assuming, for the moment, that the annual process has taken place in our dealerships.  The primary lesson we want to take away from our discussion of this topic is:

 

The process is more important than the resulting document!

 

What is the Controller's Role in the Budgeting and Forecasting Process?

 

1. Develop the schedule(s) for short-term, mid-range, and long-range dealership financial planning and reporting.

2. Develop the format(s) for short-term, mid-range, and long-range dealership financial planning and reporting.

3. Communicate the dealership financial planning and reporting system (schedule and format) to the department managers.Train the department managers, as necessary, in their respective financial planning and reporting function.

4. Monitor the adherence to the policies and procedures regarding dealership financial planning and reporting.

5. Enforce the policies and procedures regarding dealership financial planning and reporting.

6. Advise and counsel the department managers regarding financial and/or operational variances (both positive and negative) and where necessary, propose corrective action.

 

 

 

​Does your dealership currently have a combined long- and short-range planning process that encompasses everything on the left? If not, GH&A can help you develop it.

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Click on the images of these Excel files if you'd like to test-drive a couple of GH&A Planning Applications!

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