How do you bill yourself for policy work ?

[Doug]

What's the consensus out there ?If you have to charge off labor to your policy account do you do so at full price ? Do you give yourself a discount ? Or, do you have no billing amount but simply charge the labor cost to your "cost of sales"?

[lovemotors]

That question can't be answered unless we know if you are flat rate or hourly.

[Doug]

Sorry about that. All but two of our techs are flat-rate so, for the purposes of answering the question, I would consider our shop to be flat-rate.

[LRobinett]

we are a flat rate shop and we charge ourself(anything charged to shop) at cost...
Yes , it does affect the gross but not by much and it keeps the policy acct. down.

[jnewlin]

I do the same I will adjust to cost before I charge it to 67.

[KEVIN]

OK, LET ME ASK A QUESTION DO YOU ALL GET PAID OFF OF PROFIT??? IF YOU WERE FOR EXAMPLE
CHARGING YOURSELF(67D) FOR AN HOURS LABOR AT SAY $60, YOUR GROSS SALES WOULD BE UP $60 BUT YOUR EXPENSES UP $60 TO OFFSET IT! YOU HAVE GAINED NOTHING AND LOST NOTHING. I BILL 67D AT NO SELL PRICE, AND POLICE IT BY NOT GIVING MY ADVISORS INSIGHT WHERE ITS GETTING BILLED, I LEAD THEM TO BELIEVE ITS GOING AGAINST GROSS PROFIT BEFORE EXPENSES WHICH THEY GET PAID FROM.

[Doug]

. Let's say that the $60 labor sale has a cost of $15. If I charge 67d $60 I have made a $45 profit on that transaction. However, the $60 charged to 67d drops right to the bottom line resulting in net loss of $15 on that transaction. If an hour of labor must be charged off to 67d i do it at cost,ie: ro shows sale amount of $15 and a cost of $15. No gross profit, still a $15 loss in the end, BUT a non-inflated policy account.I suppose there is no right or wrong way.Just depends on how you want the numbers to look.

[Misky]

It doesn't matter because it all washes out the same in the end.

[Rick Cooper]

It really does matter when it comes to controling your business. Our sister store used to perform all kinds of poor practice such as costing policy. When you do this to keep the expense down where do you look when the bottom line is off? Look at policy hmmmm that's ok but our gross is down. Less to pay the techs (if you try to balance your cost%) so we raise the price of service rendered.

They thought thier policy was fine until they started measuring the true cost of policy.

An example of how this can cause you to look the wrong way... The used to charge the expense of service loaners from outside venders to sublet cost. This artificially raised the cost of sublets lowered the sublet gross to nil and lowered the over all gross. They were constantly trying to police their sublet gross and actualy started marking up sublets 25% with no max. Thier loaner expense showed steller control.

When this practice ceased at my request they found they were throwing loaners around as though they cost nothing (no expense right) and had trained their customers to expect this. This resulted in a very difficult situation to adress now they they knew where the money really went.

I believe in retail policy adjustments for the same reasons I believe in retail pricing for internals. Control.

If you extend the idea that it all washes anyway then why bother with accounting at all? You just need to accounts, one to post the incomming monies and one to post the out going.

[Mike]

Just a thought....if you cost out the sale to 67D, so that cost and sale are the same, it's true that the end result is the same as if you had shown gross which was then offset by expense. My question would then be "how do you ever go about measuring the TRUE expense of policy work?" by this I mean the amount of money LOST by doing policy work INSTEAD of C/P work. Policy work has a much larger, darker side to it than just the bottom line amount shown in 67D. Isn't the lost C/P revenue not to mention consumer confidence worth trying to measure?

P.S. I've had great success paying my service advisors commission on gross less policy expense.