When I walk into a dealership for the first time, I never know what I’m going to find. Sometimes there’s a friendly receptionist and a fresh pot of coffee. Other times, it’s a makeshift accounting office in what used to be the broom closet, where the “controller” is a former parts runner with a R+R login.
But one thing is consistent: money – lots of it- is moving. Every day. In and out. Sometimes more out than in. And yet, many dealers still treat internal controls like that treadmill they swore they’d use after New Year’s. It’s there, technically. It holds ties now.
As a fractional dealership CFO, I’ve come to really appreciate internal controls – not just because they keep fraud and financial surprises in check (which they absolutely do), but because they help a dealership run with the kind of structure most businesses only dream about. Without them, things can start to feel less like a company and more like a chaotic family reunion where everyone’s making decisions but no one remembers the budget.
Let’s talk about the Big Three. No, not the automakers.
The Big Three of Internal Controls.
1. Approval Processes: The Art of Saying “No” with a Smile
I’ve seen GMs treat expense approvals more like suggestions than decisions. Some will sign off on everything from large arial blimps to extravagant vendor lunches without a question. One I worked with approved a dozen big screen monitors in a showroom that very few customers spent time in, to the tune of $125,000. (true story)
It turns out “approval” can sometimes mean “nodding while holding a sandwich.”
Establishing actual approval processes – where expenses are reviewed, justified, and tracked – might not be as thrilling as a surprise two-car deal, but it keeps the dealership from bleeding cash. Expenditures should be authorized before the money walks out the door, not after you’ve discovered that someone ordered 16 branded beanbags “for the waiting lounge vibe.” (another true story)
2. Regular Reconciliations: Making Sure the Math Isn’t Lying to You
There’s a special place in hell for unreconciled bank accounts. If you’ve ever taken on the task, you know what I mean when I say it can feel like hell on earth trying to make sense of it.
Reconciling is one of those tasks everyone says they’re doing until you actually check and find the last bank rec was in February. Of last year. Meanwhile, your floorplan liability is off by the price of a Honda Accord, and someone’s still blaming “the accounting system.”
Regular reconciliations between your DMS, bank accounts, manufacturer statements, and even your sanity are essential. Especially in a dealership where every dollar counts and margins leave little room for error.
3. Segregation of Duties: Because No One Person Should Hold All the Keys (Literally or Figuratively)
If the same person is receiving cash, making deposits, reconciling the books, and also has a side hustle selling scented candles, it’s not a question of if something will go wrong, it’s when.
Segregation of duties isn’t about distrust. It’s about protecting the business and the people in it.
You don’t let the same person sell the car, sign the check, and reconcile the books. That’s not efficiency. That’s an open invitation to fraud, or at least a very creative form of burnout.
Split up the responsibilities. Let someone approve, someone else enter, and someone else reconcile. Yes, it takes coordination. So does synchronized swimming and nobody’s embezzling in that.
Controls Are Not the Enemy
Internal controls get a bad rap – too rigid, too slow, too corporate. But in my experience, they do something beautiful: they make people better at their jobs. They remove ambiguity. They stop the drama before it starts. And most importantly, they ensure your financial statements don’t read like fiction.
As your friendly, on-demand, seen-it-all automotive CFO, I promise: you can have both structure and sanity. But it starts with putting real controls in place.
Two’s Company, One’s a Fraud Risk: A Lesson in Dual Control
If you’ve ever been left alone in the breakroom with an entire Costco cake and no witnesses, you understand the temptation that comes with unchecked power. Now imagine that instead of frosting, the temptation involves creating a ghost employee who gets paid like a real one.
Welcome to the reason dual control exists. It’s a delightful little concept that says, “Hey, maybe we shouldn’t give Bob in accounting full DMS access, the keys, and the alarm code.”
At its core, dual control means two people have to be in on the act – whatever the act may be. It could mean approving a refund check, posting bank deposits, or submitting payroll. It’s not about mistrusting your team; it’s about creating a process that ensures accountability and accuracy when handling sensitive or high-stakes transactions.
Here’s how it works: instead of one person having full control over a task from start to finish, responsibilities are shared. One person initiates the process, and another reviews and approves it. This kind of shared oversight helps protect the dealership from both honest mistakes and potential misuse, essentially adding a layer of security to every major financial move.
And no, this isn’t overkill. It’s common sense wrapped in a policy. Dual control isn’t about bureaucracy, it’s about not waking up to discover your cash clearing account has a large debit balance, and your office manager is nowhere to be found.
So the next time someone grumbles about needing a second set of eyes to approve a wire transfer, just smile sweetly and remind them: we’re not trying to slow things down. We’re trying to keep the wheels from falling off.
Defining Dual Control Points (or, Why Bob Shouldn’t Do Everything Himself)
Now that we’ve established the wisdom of not letting any one person steer the financial ship alone (no matter how trustworthy or charming they may be), the next step is figuring out where to put these safeguards. This is what we call defining dual control points, which can sound more intimidating than it is – it’s simply identifying key areas where teamwork reduces risk.
Think of these control points as the “high-risk, high-reward” tasks where things can go wrong in ways that ruin weekends and possibly careers. These include activities like check signing, approving outgoing payments, and processing payroll—basically, anything involving money leaving the building that could otherwise leave you wondering why the parts department just wired $25,000 to a landscaping company in Florida.
You’ll also want a second set of eyes on reconciling bank accounts (because “close enough” is not a strategy), handling cash receipts and deposits (because cash has a way of walking off when no one’s looking), and authorizing journal entries (because “Control number ZZZZZZZZ” should never be an acceptable term in your accounting department).
In short, if it touches cash, controls cash, or even smells like cash, it probably deserves dual control. Not because your team is incompetent or devious, but because even the best people miss things, especially after lunch.
Dual Control Points Checklist for Franchise Dealerships
Use this checklist to identify the tasks that should always involve two authorized individuals and feel free to add your own.
Cash-Related Activities
- Cash receipts are counted and verified by two people before deposit
- Bank deposits are prepared by one person and verified/delivered by another
- Petty cash disbursements require approval and reconciliation by separate individuals
Disbursement Controls
- All checks require two signatures
- ACH and wire transfers must be initiated by one person and approved by another
- Refunds to customers are reviewed and authorized by someone not involved in the sale
Payroll
- Payroll is processed by one person and approved by another before submission
- Payroll reports are reviewed monthly by the Controller or CFO for accuracy and anomalies
Bank Reconciliations
- Bank accounts are reconciled by someone not responsible for check writing or deposits
- Reconciliations are reviewed and signed off by the Controller and CFO
Accounting Entries
- Manual journal entries are prepared by one staff member and approved by the Controller or CFO
- Adjustments to the general ledger require supporting documentation and dual review
- Schedules are reconciled each week, or at least each month, and submitted to management for review.
Other Recommendations
- Vendor master file changes (new vendors, updates to payment info) require review/approval
- DMS System access is reviewed quarterly for proper segregation of duties
- Floorplan payoffs and trades are reviewed by both accounting and sales leadership
Final Thought: Internal Controls Are Like Spanx—Uncomfortable, But Everything Looks Better With Them in Place
If you’ve made it this far and you’re thinking, “Okay, but we’ve never had a problem,” I invite you to consider two things:
1. You may have a problem—you just don’t know about it yet.
2. The Titanic didn’t think it had a problem either. Until it did. And then it had a very big one.
The beauty of internal controls—whether it’s dual control, approval processes, reconciliations, or just not letting the guy who buys the vending machine snacks also approve payment—is that they create a structure where accountability isn’t optional. It’s baked in. Like raisins in a very sad muffin.
Dealerships, especially franchise stores, are complex beasts. There’s money moving, metal moving, people moving. It’s all too easy to confuse momentum with control. But without proper checks in place, all that movement can take you straight off a cliff.
As your favorite on-demand CFO (who has walked into more financial fires than a pyromaniac accountant), I’m not asking you to install cameras or fingerprint scanners. I’m asking you to stop tempting fate. Put systems in place. Divide responsibilities. Reconcile your accounts like you mean it.
Because at the end of the day, financial health isn’t about how many units you sold, it’s about how many dollars actually stayed in the bank.
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