Module of the Quarter – Management Accounts

Automotive company boardrooms across the country are occupied regularly, usually monthly, as company directors take the necessary time to review and interpret company accounts. Sometimes pages and pages of accounting data are poured over and discussed during these meetings, but more often than not, the focus is on the headline figures of business revenues, gross margins and net margins with some nuances depending on the company and the business. While the headline figures are critically important, the detail behind them is equally pertinent and because this detail is reported across multiple component reports, key actionable information is often either missed altogether or is available too late to prompt decisive action. Given the necessary complexity of accounts reports, interpretation of the reports can be difficult particularly for non-finance personnel.

Management accounts in themselves are extensive and represent the end-product of a time-consuming preparation process by finance personnel. The additional need for detailed composite data reporting by most manufacturers increases the time invested by dealership finance personnel in the preparation and maintenance of accounting reports.

The RWA Management Accounts module responds to a need by Automotive dealerships to access Business Intelligence (BI) based on accounting data in a timely and efficient manner. The product succinctly presents the key performance indicators of a dealership business, providing immediate insight for all end users including non-finance personnel. The module quickly and easily consolidates the often-significant volumes of accounting data contained within a conventional set of management accounts and presents them in a clear and concise summary. Critically however, with smart filters and drill down functionality, all data can be quickly and easily dissected for analyses as required by end users.

A Profit & Loss Summary reports the top line to bottom line of the business as a whole and the different business activities it is comprised of including vehicle sales, after sales service, parts sales, fleet business, commercial vehicle sales and aftersales and body repairs. Comparisons against budget and prior year and for all accounting periods is available for real time display. Reports can be further analysed by company division, location/branch, by brand and by accounting period. Directors involved in Sales and Operations can view their respective budgets and results as and when needed by accessing easy to use dashboards. Starting with revenue and gross margin by sales channel, the dashboards report on additional manufacturer incentive income and commissions earned from the sale of Finance and Insurance products, other costs of selling, direct costs and finishes with net contribution or net profit. Figure 1.1 below shows the Management Accounts Summary page of a fictional dealership group with eight locations -

Figure 1.1 Management Accounts Summary

This Summary report is the top-level report for the company and component P&L reports for New Vehicles, Used Vehicles etc are also available while all reports are supplemented with a Section by Branch report and a Branch Matrix report which helps to provide a comprehensive view of each business area, department, location or brand under review. Inbuilt performance trendlines report the trend against budget for each line item for the financial year, and it shows this in terms of a favourable variance (green) or adverse variance (red). Each point on the trend line represents a month and each one in turn displays the actual result and budget result pertaining to that month.

An even more powerful tool for the analysis of the performance of a business, department, brand or location is the Performance Outliers dashboard. In RWA’s experience, and based on feedback from customers, this is arguably the most insightful aspect of RWA’s management accounts product. Filters allow selection of P&L Heading, company division(s), location(s), and financial period (month or year to date). The report immediately presents all the data in a scatter plot diagram across quadrants. Variances against budget and prior year actuals are reported in the scatter plot within each relevant quadrant which are visually represented using a clear legend. The ‘spread’ or distribution of variances is immediately visible, and depending on the item selected, one can quickly see the performance of the business in that area. Each data plot on the diagram represents a single line item and hovering with the mouse over any one of them provides specific relevant information. ‘Outliers’ can be easily identified and excluded from the data set, if preferred, and a single quadrant or multiple quadrants can be selected for export into a pdf file and circulation to the relevant management personnel. The scatter plot is completely dynamic. Concentrating on one line item, or grouping, or altering the various filters means the scatter plot responds accordingly. A CEO might want to plot the relative performance of new car sales for a specific sales region or regions against finance commissions paid for the same regions, and in this way the report brings a focus to correlated items. Obvious examples of correlated items include vehicles sales and commissions paid, labour sales and consumables, body repair time sold and paint sales etc. but there may be others specific to a company or business and these are easily focused upon using this report. Equally, one can compare or contrast the relative performance of brands, locations and business areas in this way. Figure 1.2 below illustrates the variance analysis of direct costs related to a service business, across eight service locations of a fictional dealership -

Figure 1.2 Performance Outliers/Variance Analysis

The RWA Management Accounts module is fully automated, and the reports within provide a comprehensive and succinct view of the performance of a dealership. It is scalable for small and large businesses alike and can be applied to a large dealership group with multiple divisions, companies and dealership locations. With the RWA Management Accounts module all company personnel have one version of the truth. The module is based on accounting and budgetary data extracted from dealer management systems and other sources. Conventional accounting reports including trial balance, rolling twelve months, balance sheet and cashflow analysis are all accessible, providing inbuilt validation and trust in the data output as well as providing much sought-after efficiency in the entire accounts’ preparation process. The efficiency and time saving afforded by the RWA Management Accounts module allows finance personnel to work smarter and focus on other value-adding activities.

Management Accounts are extremely important to the running of a company and facilitates the requirements of the executive to provide oversight to the board. However, when the management accounts are produced, they should never be a pleasant or unpleasant surprise. A well implemented BI solution will provide accurate tracking on a day by day and week by week basis so that the management accounts are confirmation of what the executives already know. This exciting and dynamic new module helps to foster a data driven, forward-looking perspective in relation to decision making.