TIME OUT - DealersEdge
TIME OUT - DealersEdge
TIME OUT - DealersEdge
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<strong>TIME</strong> <strong>OUT</strong><br />
Strategies and Tools to Shrink<br />
WIP and Unapplied Labor<br />
<strong>DealersEdge</strong> Management Webinar<br />
Rob Campbell, Analyst<br />
The Mironov Group
Introduction<br />
• Speaking the same language<br />
• What’s the problem?<br />
• Understanding the interaction of the<br />
transactions to accounting<br />
• Top five errors with specific cases<br />
where things can go wrong<br />
• Reducing unapplied time
Speaking the same language<br />
• Service side<br />
– WIP or work-in-process is the amount of<br />
labor you have expended on open repair<br />
orders<br />
– Just the cost of open repair orders<br />
– We will just refer to it as an “open repair<br />
order report”, but it is the report showing<br />
costs on the repair orders.
Speaking the same language<br />
• Accounting side<br />
– Work-in-process, labor-in-process, work-inprogress<br />
is the inventory asset account<br />
– We will just refer to it as WIP.
Transaction side<br />
• When is labor/time paid to the<br />
technician?<br />
– If it is only when the job is complete and<br />
invoiced, should there be any labor cost on<br />
the Open RO report?<br />
– What about multiple lines – LOF, rotate,<br />
coolant flush, warranty door trim (SOP)
Accounting Side<br />
• Payroll journal<br />
• Sales journal<br />
• General journal
The Problem …<br />
• Gross percentage you know what to<br />
target<br />
– You see many RO’s, you run exception<br />
reports, advisor reports<br />
• Expenses you comb over and know<br />
what is going on<br />
– Expenses are easy to see because there is<br />
a physical check/P.O. associated with<br />
them.
The big leak in the barrel
The Problem …<br />
• Work-in-process compared to open RO<br />
Report<br />
– Labor we have bought<br />
– Labor we reasonably expect to get paid for<br />
$11,651<br />
difference
The Problem …<br />
• An inventory shortage. The dealership<br />
bought an asset with the intent of resell<br />
• A direct and straight hit to gross; the<br />
problem is actually worse.<br />
– Assume 70% gross profit - $11,651 lost in<br />
W.I.P<br />
– $11,651 ÷ 30% = $38,837 sales lost,<br />
$27,186 in gross lost
Look at the accounts<br />
• Understand your dealership’s practices<br />
– When is labor paid<br />
– How are transactions posted<br />
– How is the payroll posted<br />
– What are the specific procedures in the<br />
dealership? Do a walk-through of the<br />
transactions.
Look at the accounts
The solutions<br />
Gather Compare Correct
What Could Happen?<br />
• Tech was paid more than was billed<br />
– Purposefully over paid for job<br />
• By management<br />
• By Advisor/booker<br />
– Was mistakenly overpaid<br />
– Some is cheating the system
The solutions<br />
Gather Compare Correct<br />
Flag sheets<br />
Invoicing<br />
reports<br />
Time flagged<br />
to<br />
time billed<br />
This should be<br />
part of your<br />
weekly payroll
What Could Happen?<br />
• Costs are incorrect or do not take into<br />
consideration variation in pay rates.<br />
– Tech is given a raise in payroll but<br />
invoicing is not changed.<br />
– Tech has a productivity bonus or override<br />
on hours
The solutions<br />
Gather Compare Correct<br />
Tech settings<br />
Payroll<br />
settings<br />
Flat Rate<br />
to<br />
Flat Rate<br />
Fix rate or<br />
use other<br />
account for<br />
bonus
What Could Happen?<br />
• Tech is paid for "shop time" that is<br />
never billed.<br />
– If you are paying time it should be billed to<br />
someone<br />
– Open an internal and expense to time to<br />
maintenance or other account<br />
– Open another line/RO for policy
What Could Happen?<br />
• Salary guarantees are paid<br />
– Payroll goes in at 40 hours – but only<br />
assigned cost comes out.<br />
• Hourly people are place in WIP<br />
– Both the light tech work<br />
– Foremen or leaders
The solutions<br />
Gather Compare Correct<br />
Payroll<br />
Invoicing<br />
reports<br />
Time Paid<br />
to<br />
time invoiced<br />
Routine<br />
adjustments<br />
should be<br />
noted
What Could Happen?<br />
• Accounting mistakes are happening<br />
– Vacations<br />
– Training<br />
– other time-off<br />
– Non-productive people being put in there<br />
• Remember: W.I.P is a sellable inventory<br />
• Accruals are not properly handled
The solutions<br />
Gather Compare Correct<br />
Payroll<br />
To what you<br />
know about<br />
the personnel<br />
Occasionally<br />
check for<br />
errors in<br />
postings
What Could Happen?<br />
• Payroll master summary for techs
The solutions<br />
• If all else fails you can set-up the<br />
account to schedule for a week or two<br />
to actually watch the additions and<br />
relief.
Minimizing Unapplied Time<br />
• We discussed several solutions<br />
– Make sure payroll reflects invoicing<br />
– Bill time to proper expense<br />
– Make sure unapplied time is really<br />
unapplied<br />
• Consider other payments for shop time<br />
– Preferable jobs
Thanks for listening …<br />
• Are there any additional questions?<br />
• You can reach me afterwards via email at:<br />
rcampbell@mspcpa.net
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