4 keys to providing accounting services to auto repair customers

One of my favorite types of businesses to work with, as an accountant, are auto repair shops. Given that Kildal Services’ first customer was a repair shop – and in fact still IS a customer – I have a special place for them in my nerdy accountant heart. It’s been so rewarding to go from picking out the first computer he bought for the store and helping him choose a credit card processor to helping him open a second location, developing a data sharing program profits and obtain financing to buy a building for a possible third.

We perform all day-to-day bookkeeping tasks for him: move sales from his store software to his accounting program, all his accounts payable, process payroll, assist with sales and payroll tax compliance, and work with his tax preparer at the end of the year. Heck, I even stopped by to pick up parts and once bought him a printer on my way to his store!

It’s a fantastic industry to focus on – none of the store owners I know want whatever to do with books, and there are many that may need our help. I think there are a few key areas where accounting professionals can take on this coveted advisory role, and we’ll review them here.

Inventory

To follow or not to follow? About ⅔ of the stores we work with are small (they average 2 bays per store) so keeping inventory isn’t really an option as they don’t have the physical space to store it, so they do not track the quantity available. Most stores that are larger and To do have the space have chosen not to track inventory as well – they spend most of the things they use regularly: filters, clamps, hoses, etc. Almost everything else is ordered from their parts suppliers and can be delivered same or next day.

About a third of our stores to track inventory and are divided into two types: the former are larger stores with more than 5 bays and have a greater volume of passing vehicles and room to store parts, they therefore order larger quantities to get better prices and want to keep track to manage costs and reorder points. The second is specialty shops that work on performance/racing, foreign, or off-road vehicles (ie: dune buggies – we have great sand dunes here in Michigan.) Parts have a longer delivery time, may be harder to find and cost more, so tracking the quantity available is a necessity.

Software

Ensure the store has the right store management tool for them. One of my stores only uses QuickBooks Online. He’s a one-man band with a small garage with a hoist and right now he doesn’t need the bells and whistles that a full store management solution will provide. It’s easy to tell where he stands with WIP when he can only have one vehicle in the shop at a time! Most auto repair shops will need something suitable for their industry.

Overall, every one of our customers using a shop management solution says these are must-haves: access to the national job guide database, estimate, vehicle service history, technical service bulletins and integration of parts ordering. Other things to look for are reports (for you and your client!), time tracking, scheduling, and integration with accounting and marketing apps.

This is where a needs analysis is an excellent service to offer; meet with the owner and each employee to find out where their pain points lie, then use that information to find a better software solution, or find ways to improve current processes to better utilize the software they have in place. I’m not going to make any specific software recommendations here, but I will say that there are some boutique software out there that I love, but the accounting integration for them is abysmal, so for a few customers we’re still – GASP! – manually enter sales summaries.

Returns and casts

Give them a system! For any wrong/defective parts, your stores will need to return them. Each supplier will have their own process, and once they are ready for return, you will need a system in place to return them to the supplier. We suggest that each supply store have a designated area; the technicians include all the documents required for the return, and they register them via a Google form, then keep copies of the documents in a wall file above the seller’s area. We can track everything from supplier invoices or credits, hard copies and Google Form at the end of the month.

You will also need to take care of the cores – they are similar to bottle deposits. You pay a deposit at the store for the bottle, then you get it back when you return the bottle. We have a similar process in place to returns for casts, to ensure stores get the correct cast credit. Our Google form is set up for techs to choose whether to add a feedback or a core. Be sure to always get a receipt from the seller and remember that dealers will (most often) need to be reminded to pick them up. You’ll want to check the driver slips against the Google form and all statements at the end of the month.

Tendencies

It’s one of my favorite things to do for my shops – review trends. Our clients access their own financial reports or we send them out on a set schedule, but at least once a quarter I take a look at their financials and send them a quick analysis. We look for anomalies – why are parts costs so high relative to revenue? Is this normal at this time of year? Why, yes it does – the same thing happened this time last year: a government contracted customer has open invoices and their fiscal year end is approaching. When do sales jump? School is just out and customers are getting their car ready for their summer road trip, it’s easy to create a graph like the one below – you can see this graph shows the sales trends for one of our stores (I omitted the totals). Without even seeing the numbers, we can see that there is a slight increase in March when people get their tax returns, and again in May, before the summer begins.

When it comes to auto repair shops, I think the most important thing to keep in mind is that you want access to the shop management solution. While setup and troubleshooting is a huge bonus, you should at least be able to pull reports out of it to verify hours, reconcile credit card batches, and in the case of a former customer, ensure that all the money is collected. actually arrives at the bank!

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Stacy Kildal is an accountant and QuickBooks expert from Michigan. She enjoys snowmobiling, hiking, listening to Rush and discussing the cuteness of her cats with her husband and two children.

Kristan F. Talley