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Good accounting practices will help you get a handle on your business.

Wednesday, September 12, 2012 - 09:08
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When I ask shop owners how they QC (quality control) their body technicians – what they look for is to get a sense of how those techs are doing. They generally say they check for simple details, such as making sure that gaps are aligned and that door handles and lights work.

If I ask them how they QC their painter, they usually say they check color match, and look for dirt or runs in the paint.

Mike Anderson

But if I ask how they QC their bookkeeper or accountant, most shop owners just draw a blank. But it's a critical business function.

Here are some rules I suggest to help ensure your bookkeeper or accountant is getting you the financial information you need to monitor and improve your business.

First, recognize that junk in equals junk out. If you're not putting accurate and detailed information into your accounting system, your profit-and-loss and other financial reports aren't going to be of very much value.

Second, a detailed chart of accounts will help ensure that items are getting coded and posted properly and consistently for both your management and accounting systems. (Email me for a sample chart of accounts.)

A good chart of accounts will help you meet my third rule: Don't lump things together. Don't just have one category for all labor; break down paint, body, mechanical and frame labor. Don't just have one category for all parts; break down OEM, non-OEM, recycled and "stock" (for such items as seam sealer).

Why? A good profit-and-loss statement doesn't just help you determine where you are making money or losing money. It also can help you determine where you are not maximizing profits. Lump all your parts into one category, and you'll probably find that you're making money – but is it the profit level you should be making? Different types of parts have different profit margins, so if you detail out the various types of parts, you can work to ensure you're maximizing profit on each.

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