Collision repair bookkeepers everywhere breathed a sigh of relief when management systems began feeding sale and cost information into financial systems, eliminating hours of data entry. But the reality is that although the process of recording transactions has been simplified, the process of ensuring the accuracy of those recorded transactions is often overlooked. Today’s management systems are very good at directing data into the designated account buckets, but what if that direction is wrong? The key to accurate financial reports is making sure that the data is coded accurately before it ever goes over to the financial system.
Correct data coding is often hampered because some personnel aren’t concerned with where the numbers go in the end. Estimators, for example, must understand how important it is that estimate lines are coded as accurately as possible before the repair order is closed. If the shop is going to sublet out removal of a quarter glass, for example, any labor hours for that operation should be converted into sublet dollars in order to result in both a sublet sale and a sublet cost. Without this conversion, the inaccurate result would be a labor sale and sublet cost – and perhaps labor cost if the tech is paid flat rate for those incorrectly coded hours.
Another common error I see in MSOs’ financials is in the coding of materials, supplies and stock parts. Such lines are frequently left coded as whatever the default coding is in the estimating system. If there is not a specific invoice for the item, lines for something like glass adhesive may be left as an “aftermarket part” when the shop wants it coded as “stock parts” or “body materials.” I advise MSOs to develop a cheat sheet to show estimators, parts personnel and bookkeepers how various items should be coded in both the management system and financial system.
Many management systems have scrubbing features that can assist with this. “Detail Line Formatting” or “Line Mapping” enables a shop to specify how a particular item or operation should be coded – so that even if a line is miscoded, the system will direct that operation to the correct account. For instance, if you want to direct the labor time for finish, sand and buff to a refinish labor account, you can set up a line mapping rule to do this. The caveat is these rules only work if there is an exact match. If one estimator enters “finish sand and buff” (no commas) and another enters “finish, sand, and buff,” the system will direct only the exact match to the correct account. It can be a challenge to get all estimators to use exactly the same line wording, so you may need to create multiple rules for the variations.
Dates can be another source of errors in financial data. I have seen many instances where an RO is closed in the management system in one month but the sale was posted in the financial system in the following month. This frequently happens with parts invoices as well. Anyone posting parts invoices or closing files needs to understand the importance of getting the dates correct to ensure sales and corresponding costs are recorded in the same period.
Dates can cause problems for work in process (WIP) numbers as well. For instance, if a job is closed in the management system, those costs will no longer be included in the WIP totals on the WIP report. Those costs will not be reversed out of cost of goods sold and will remain as costs for the month. If the sale inadvertently gets posted in the following month in the financial system, you now have costs in one month but the sale in the next.
Everyone with their hand in the process must understand the importance of coding lines correctly. Setting up line mapping rules can be tedious but they can be invaluable in getting your ROs reported correctly. Train your staff and don’t forget to spot-check several ROs each month to be sure that the sales and costs are posting where they should be posting.
Remember, your MSOs’ financial statements are only as good as the data being fed into them.
