LAS VEGAS — It’s your budget, you need to track it. And while you’re tracking it, keep an eye on parts and products that could be lost along the way.
Even just losing a $6 product could end up costing your shop big time, up to $600 depending on what your net profit currently is. That can be some scary numbers for your bottom line, according to Charlie Fewell, who presented “Financial Management for the Service Center” during training classes Wednesday morning at the Congress of Automotive Repair and Service (CARS).
“Industry wide, I don’t think we recognize the importance of accounting for what we buy to resell it,” he says. “So when they buy parts, their only purpose for buying them is to resell them. If I don’t track that, it becomes a loss. If I have to keep replacing things I don’t see, that becomes a cost of doing business that is hidden but yet can put them out of business.”
Fewell cited the example in his presentation that at 5 percent net profit, if you lose a $6 product, you need to make a $120 sale at full price to make up for it. At 1 percent net profit, it would have to be a $600 sale, while at 10 percent net profit, it’d be a $60 sale.
To help curb this from happening in your business, Fewell says there are basic steps all shop owners should take, and those techs attending CARS should pass on back in the shop. First is maintaining a company tool inventory.
“Take tool inventory every year. If it’s a company-owned tool, take inventory. If you have an employee that you fire, take inventory,” Fewell stresses.
To help with that, he suggests also numbering company tools and equipment for easier tracking, inventorying shop supplies and of course, dismiss any employee caught stealing immediately.
“The loss is so important because in our industry, again we don’t make ourselves accountable for things that come in like that, because everything that comes in is only coming in to go back out,” Fewell states. “Knowing that’s the whole purpose, if I don’t measure what comes in and what goes out, and it falls through the cracks and I have to keep replacing stuff, that takes money off the bottom line.”
Fewell highlighted the bottom line and other profit and loss sheet aspects in his meeting. From measuring productivity and efficiency, to expense control and forecasting, he worked with the shop owner attendees to better grasp their financials when they return home. He says in the end, he hopes attendees take three to four of the measurements taught and implement them in their business.
“What I find across the industry is that most of the time we’re so busy working in our business we don’t take time to look at our business and the financial aspect of it and measure what’s going on,” he explains. “If you don't’ have a way to generate net income and day to day measure that so that you know you’re on your marks, at the end of your business life, you have nothing. You just had a job instead of a job or a business.”
