Accounting and bookkeeping aren’t the most fun but are essential for a successful auto repair business. Keeping track of your revenue and expenses will help ensure your shop stays in good shape without hitting any potholes. An efficient system for managing part-core returns can also generate additional revenue for your business. Ensure you’re creating a system that is easy to operate and can be used by multiple employees.
Accounting may not be your favorite subject, but it’s one of the most crucial parts of running a repair company. Proper bookkeeping makes tracking expenses, invoicing clients, and meeting tax deadlines easier. First, you should check your state’s sales tax laws. It will help you determine what parts are taxable and how much you should charge. Take advantage of services like accounting services Walnut Creek CA. If your auto repair shop buys parts wholesale, you’ll need to collect the sales tax and report it to the state at the time of purchase. Some states also have a unique program that allows you to purchase tax-free wholesale parts for resale.
Auto repair shops must know their part’s margin to maximize profitability. It is because details make up a significant portion of shop revenue, and auto repair shops typically have a 20-40% gross profit margin on parts sales.
Keeping a parts markup chart handy ensures you meet your GPM goals for each repair order. It also allows you to track your parts expenses and ensure you maximize profits in every area of your business.
Understanding how your parts margin fluctuates month over month can help you spot financial opportunities, such as a vendor giving you lower-than-expected discounts or using more LKQ (used) parts than you expected. It can lead management to take action and either negotiate a better deal or change its parts inventory.
Inventory is critical to any heavy-duty repair shop, whether an owner-operated shop, one under a fleet, or inside a dealership. Stocking the right parts for the job will help keep customer service high and reduce downtime.
An inventory management system is a great way to get control of your stock on hand and keep it there. Performing inventory cycle counts will show you how much your supply grows or shrinks each quarter and ensure you maintain the correct balance.
You can track goods across different sites with a reliable inventory management system, which is crucial if you use mobile personnel. In addition, it will enable you to keep track of all inventory-related invoices, reducing errors and saving time.
Chart Of Accounts
A chart of accounts (COA) is an index that lists all the financial statements in a business’s general ledger. It helps organize finances and gives interested parties, including investors and shareholders, a clearer picture of a company’s financial health.
A typical COA will include five primary account types: assets, liabilities, equity, revenue, and expenses. Each account has a name, a brief description, and a number that identifies it in the general ledger.
Asset accounts are your business’s valued resources, such as cash in hand, real estate, inventory, prepaid expenses and goodwill. On the other hand, liabilities are your financial obligations that need to be paid, such as accounts payable and bank loans. Income accounts, such as sales, are the money that comes into your business.
Auto repair shops need an excellent organizational structure to keep everything running smoothly. It includes a system for tracking vehicles, customers, parts and more.
The proper organizational structure can help mechanics and technicians be more productive while keeping costs low. It also helps ensure everyone is on the same page about what’s expected of them and when they need to complete their tasks. Organizational structures can vary based on the size of the shop and its type of business. Choosing a system that works for your business and fits your goals is essential.