Lof accounting

[bob s]

Does anyone do different accounting for lof changes? What i mean is do you put parts and labor in gog or anyplace else besides cp labor and parts. Since lof's are a loser must times with specials and low profit margin with us i would like to track it and also not have it effect gp% on the statement. What do you do or am i wasting time?

[jazdale]

Most manufactures have new lines (parts and service) on their financial statement for 'quick service'.

It is amazing how 1000 LOFs @ 45cents gross can dilute your profitability.

[dodgeboy]

Thats a great question Bob. I am curious too. My advisors are paid on hours per RO and I actually do feel bad when I know the LOF's are bringing the hours per down. The great success of Employee pricing of new vehicles has doubled the amount of low mileage service customers in our store. Its hard to upsell to a 3000-6000 mile customer and I agree that from a advisors postion LOF's should be accounted for differently.

[2wheels4me]

If your DP/GM/Controller will allow it you might consider this. Price your lof at a reasonable margin on the RO then use a misc. code to take the dollars off the sale. The removed $$ would be debited to an expense account such as advertising or shop supplies. This just moves $$ around but it will help your GP$/hour per RO ratios. Also, if you use an exp. acct that is only for this purpose tou can track exactly what these services cost you. Might help show your advisors the importance of the upsell on lof tickets.

[SVCDIR1]

I have the same problem with my advisors pay plan. The lof tickets really drag their gross profit %'s down. I created a report in REY REY 6910 that takes the lof tickets out of the equation. It is just like the 3606 report-less lof's. THe ro's still show up in the Finacial statement, but it gives the advisors a fair brake. The report only takes the 1 line lof tickets out. if there is anything else on the ro, it does not remove the ticket. this lets the advisor upsale the ticket without fear. I have pre priced all lof labor ops with parts kits, so we have a little more control on the pricing. we are grossing approximately 3-8 dollars on lof...low priced to synthetic lof.

[dodgeboy]

SVCDIR1, could you e-mail me a copy of that report? I'd like to look into doing something similar. Thanks

dirish@sdnetwork.com

[BIG ORANGE]

I fought with this for years, and now I use a discount at the end of the ticket which will allow me to show full labor and parts on the ro and put the discount at the end during the cashiering process. This has fixed my problem, I get to show full labor rate and correct pricing on parts. I have the discount put to advertising account where it should be. Let me know if I can help more.

[Old Irish]

But discounts are not advertising !! They are a reduction of sale amount.

"Correct" pricing is what you actually receive. Showing a higher sale amount and then charging off a portion of it to an expense account is just (intentionally)skewing the numbers to make them appear...well...better than they really are.

The expense incurred in, let's say, creating a mailer to customers which includes discount coupons is *advertising" expense.

The discounts *given* are not advertising

Just my 2-cents

Cheers
DD

[This message has been edited by Old Irish (edited 05-24-2006).]

[topshop]

>I fought with this for years, and now I use a discount at the end of the ticket which will allow me to show full labor and parts on the ro and put the discount at the end during the cashiering process. This has fixed my problem, I get to show full labor rate and correct pricing on parts. I have the discount put to advertising account where it should be. Let me know if I can help more.

This is how we do it also. Now, one can put those discounts wherever they want. Maybe a new expense line for the discounts. Doing it this way shows how much parts and labor the tech really performed. The tech didn't discount it, the business did.

I believe these ROs should be mixed in with all of the others instead of pulled out to some different area. Reality is that these are jobs just like all of the others. Removing them gives fantasy results that will never actually occur.

The situation is what it is and the tech and SA compensation should be adjusted according to reality.

------------------
Tom Ham
AutomotiveManagementNetwork.com

[Old Irish]

"Doing it this way shows how much parts and labor the tech really performed. The tech didn't discount it, the business did."

No, it doesn't

What you are suggesting shows what the sale *would have been* if it hadn't been discounted !! But, in fact, it *was* discounted so the *actual amount collected* is what "really" happened ! No fantasy....

What you've suggested above makes sense if they techs were paid on the *sale amount* of parts and labor. I sorta doubt that many shops use this arrangement.

Tech performance and pay is tradtionally measured in flat rate labor hours. In essence the shop buys labor from the tech and then sells it for whatever amount they want. If the job pays 1.0 the tech then gets paid the 1.0 hour at his agreed upon rate. The shop then sells that one hour of labor for $1.00, $15.00, $75.00, $100.00---whatever. But, you know that already and the subject of measuring tech performance in this discussion just muddies the waters, IMHO.

Tom, please explain your logic. You advocate showing a full (that is to say, false) sale amount "at the top" and then showing a discount "at the bottom" .... but then advise that such repair orders *not* be segregated. Well, if you account for discounts "at the bottom" there would be no need to segregate the tickets....as they all would be showing (false) full-pop labor and (false) full-pop parts sales anyway !! Only your advertising account would suffer.

Am I missing something ?

I agree that we should avoid the "fantasy" statistics created by moving numbers around although, beleive me, I've done plenty of it in my time

I really have a hard time with the idea of COLLECTING $35.00 but showing it as a $50.00 sale with a $15.00 write-off....and patting yourself on the back because your gross profits are so high.

Actually, I don't so much have a hard time with the idea of doing it, but I have a hard time with the idea of so many people trying to convince themselves (and me) that it is "correct". C'mon, guys. If you wanna skew the numbers then go right ahead....but let's not kid ourselves here !


When a car is sold for $100 over invoice is the sale recorded at full sticker price and then the "discount" charged off to advertising ?? Of course not ! The sale amounts are recorded AS-IS and at the end of the month you can get a true picture of your gross profit per car.

Labor and parts sales should be recorded AS-IS and then you'll have a TRUE picture of your profit percentages, effective labor rate, and so forth.

Mini rant over

Cheers
DD