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Using paint/material accounts to improve profits

Monday, April 1, 2019 - 07:00
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The toughest obstacle to paint/material profitability is reporting products in the wrong category. I encourage shops to separate paint/materials into four categories: Paint, Supplies, Materials and Tools/Equipment. Since the calculated paint/material reimbursement you receive on damage appraisals is for liquid paint products only, it is important that the products used are accounted for correctly to ensure items outside of the liquid paint category are billed properly.

Account Product Category Category Items
1.1 Paint Paint products used in the refinishing process such as: Toners, Primers, Sealers, Clears and any other liquid products used during a repair.
1.2 Supplies Items used during the repair process: Sandpaper, Masking Paper/tape, Body Fillers, Glazing Putty, Scuff Pads, Cutoff wheels, Fiberglass repair products, Car Cover etc.
1.3 Materials Items needed to complete a repair process: Plastic repair products, panel bonding products, corrosion protection products, seam sealers, two-sided tape, adhesives, sound deadener pads, gravel guard etc.
1.4 Tools/Equipment Respirators, air hoses, plastic spreaders, paint mixing cups, spray suits, razor blades, gloves, booth filters, paint sticks and strainers.

Knowing which category items go into will make it easier to bill for the items used during a repair. However, regardless of whether you bill for an item or not, accounting for them in the right area is what keeps you profitable. Accounting for paint and materials begins by organizing accounts like the chart above so you can receipt for products properly when they are delivered. Your supplier can assist you with accounting of items by creating a separate invoice for the items according to the account codes when they are ordered. Individual invoices will help prevent errors in the accounting process. The alternative is checking each line on the invoice and identifying the proper account. Ensuring the items you use on a day-to-day basis are properly accounted for is the first step in improving your profitability.

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I commonly see everything used in the paint shop all put into one category; according to the chart above they should be separated into four buckets: Paint, Supplies, Materials and Tools/Equipment. As you can imagine, it would not take long for your profits to dwindle if a can of body filler or a roll of sandpaper was charged against your paint account — even a respirator can skew your profitability.  

The Supplies account is also called consumables as they are consumed during a repair. Billing procedures for supplies are different from shop to shop and market to market.  Some shops will add a charge for body supplies based on the number of hours on a repair appraisal, others use inventory systems to charge for each item used individually and others do not charge at all. 

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A majority of the profit loss I see is in the Materials category, which is unique to the other three.  The materials category is unique because the items listed in materials are all required, but often overlooked as billable. Many use a token fee, “Corrosion protection — $12” or “Seam Sealer — $10” in miscellaneous on their damage appraisals. Without getting into estimating processes, those two charges do not tell anyone anything: doesn’t say what product, doesn’t say where it is used nor, does it specify any quantity. My thought is that if you can measure what you use and tie it to a repair process, then it should be specified and billed. Another thought is that if it goes on a car and leaves with the car, then it could be considered a part and every part used on a repair should be billed separately. I had a chance to work with a shop using the 3M CRiMP tool where we created an invoice for the items required on a door skin replacement. Using the concept that materials are a part, let’s see how the billing would work.

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