Automotive & HD Business Management Articles.
Bob Greenwood. April 30, 2014. ( over 4 years ago ) 844 views
It is recommended that proper labour categories are set up in your shop’s POS and accounting system to track what type of labour revenue the shop is realizing.
The minimum labour revenue categories to be set up today include maintenance labour, diagnostic labour and re-flash labour. Some shops can have up to five labour revenue categories.
That being said, business operation guidelines and objectives must be set to ensure the business is capturing all opportunities to grow the business and capture net income.
One guideline is with diagnostic labour billing opportunities. The shop should be billing a minimum of 25% of maintenance labour billed as additional diagnostic billed labour.
The math behind this percentage formula is very in-depth, but based on our latest past two national surveys, this is the percentage the average shop in Canada should be targeting for 2014.
For example, if a shop bills out $30,000 for the month in maintenance labour, then the shop should have billed at least $7,500 additional labour as diagnostic labour. Total labour billed between the 2 categories is $37,500. Keep in mind, the diagnostic labour rate is a much higher rate than the maintenance labour rate.
If the shop is not achieving the guideline, then internal processes have to be thoroughly examined because the opportunities are there but when the internal processes are not right to capture opportunities, labour billings are missed all the time.
When labour billings are missed, net income is missed.