Is Your Mechanic’s Billable Time Accurate? (Lesson 9)
I often hear from auto workshop owners about how difficult it is to ensure their mechanics are charging the time they spend on jobs accurately.
It is crucial to your business success that you know your mechanics are not under charging (or over charging.) To put it in very simple terms: If the number of hours your mechanic works on a job is very close to the number of hours charged for that job then everything is fine.
However, if the number of hours a mechanic has worked on a job is significantly more or less than the number of hours charged, then there is a profit leak in this aspect of your business. The possibility of profit leaks is what makes it so incredibly important that you have a system that allows you to see exactly how much time is spent and on what.
Here is a classic example of a sadly all-too-common occurrence, particularly in well-established auto workshops with loyal customer bases.
Joe has been in the auto workshop business for almost twenty years. He has a loyal customer base, he knows his customers well, and he has always made a good living, however in the last year or so, he hasn’t been doing as well as he would like. He couldn’t understand why he was now finding money a bit tight, when he wasn’t doing anything differently.
Joe didn’t realise that while everyone else around him had increased their prices every year, he had not. He was paying more for parts and labour, while his rent had also increased. Below is just one example of how under charging his service was hurting his business.
For the past ten years Joe has been charging out a logbook service at $200 but in that time the services are taking significantly longer due to more complex vehicles and requirements. This results in an incorrect charge because what was once taking Joe an hour is now taking him two hours.
Joe does some quick calculations and realises he is undercharging by about $100 three times a week all year long. In a year this is costing him an estimated $15 000 per year.
When you look at the loss in figures like this it becomes very clear how crucial it is to stop this profit drain.
If you have ever wondered where your profit is going, it might be time to look at what you charge and if it is accurate. But there is even more you can do to ensure time is charged correctly.
Imagine if you had a system that clocked the hours each mechanic spent on a job. Wouldn’t that eliminate this problem altogether? To keep your business on track towards maximum profitability, it is absolutely essential that you are getting the maximum productivity from your mechanics during every single hour that is available.
The problem many workshop owners face is finding a way to do this cost-effectively, without mechanics spending all their time doing paperwork to log which job they’re working on and for how long. A clocking system can sort out this issue and provide you with the facts and figures.
There is also the issue with manual systems that there is the possibility of human error (whether it is accidental or intentional), with mechanics forgetting to log on or off jobs and simply guessing at job times when they realise they have forgotten to fill in the paperwork.
It is extremely easy to ensure your mechanics are charging their time correctly if you have the tools to allow you to do so. If you, as the auto workshop owner, can easily see a performance report that highlights your mechanic’s time worked compared to the time charged and the gross profit of each job then you know that everything is okay. Without this information how can you be sure you are making money?
To your success,
Australia’s #1 Automotive Business Growth Expert