Managing Company Assets, Part 2 – UnderhoodService

Managing Company Assets, Part 2

In this space last month, Steve Louden, president of Louden Motorcar Services in Dallas, shared his insights on ways to significantly boost your shop’s revenue potential by analyzing HOW you manage your company assets. Lack of attention in these key areas are oftentimes the number one reason for a shop’s poor performance or failure, advises Louden.

Continuing his discussion this month, he delves into eight other key shop assets.

Cash. Today, more than ever, Cash is King. Money makes the world go around, so always keep an adequate sum of working capital available. Cash flow is also very important as you cannot make payroll or pay parts accounts with accounts receivable or work in progress.

Accounts Receivable. This asset gets more businesses in financial trouble than just about any other. With today’s credit cards and 90-days-same-as-cash programs, why extend credit to a customer? If they don’t have a credit card or it’s maxed out, do you really want to carry them yourself? There are exceptions for “A” level customers or the customer who wants to mail you a company check, but financing the marginal credit risk will usually burn you. And, don’t invest more in a car than you can quickly recover if the customer walks away from it. Don’t be bashful about asking for a deposit on large jobs. Attorneys do it and call it a retainer.

Work in Process. This is almost the same thing as accounts receivable as it represents an investment in time and money. These have a way of growing legs and never getting billed to the customer and, thus, not getting paid. Constantly review this asset category and turn it into cash. The longer a WIP repair order stays unbilled, the more likely it will NOT be paid.

Credit Rating. I cannot over-emphasize the importance of building, keeping and managing an excellent credit rating both for the company and personally. An excellent credit rating will always get you the best deals and terms. Your credit rating is quite simple. It broadcasts your ability to keep your word. For example: Do you pay your obligations as promised?

Parts Inventory. When you look at that part on the shelf, picture it as a stack of dollar bills because that’s exactly what it is. If it does not turn, it’s costing you money and will eventually become obsolete. Your availability of parts will determine the amount of parts you need to stock. A car sitting on a lift waiting on parts is costing revenue to the shop and pay to the tech. The ideal scenario is obviously having a “just in time” flow of parts and keeping the fast-moving parts in stock, which keeps the cars moving and the techs happy.

Parts Returns and Cores. These are not only parts, but stacks of dollar bills needed to pay the parts account or make payroll and are, many times, sitting in a forgotten corner. If they’re not returned in the same billing month, then they must be paid for and represent dead inventory and cash. Be sure you have a policy for dealing with these and a follow-up method to make sure your parts account gets credited. 

Equipment. Having the proper equipment to work on today’s cars is an absolute necessity today. With all the electronics on cars, a dwell meter and timing light will not cut it. And, back to the cash and credit rating ­subjects, one or both are necessary to purchase the necessary equipment. Be sure to keep your equipment maintained and updated. There is nothing more frustrating to a tech than a non-functional piece of equipment.

Customer Base. Last, but not least, is your customer base. Guard it. Long-term customers are your best source of business plus referrals and keeping your present customers satisfied should be a prime objective. They are loyal and appreciate the great, trusting relationship built up over the years. Trust is, in my opinion, the most important part of any relationship. Take care of your customers or someone else will. A customer will usually not leave unless you give them a reason. 

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