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Paint materials: Don’t confuse expense with cost

Tuesday, March 20, 2018 - 06:00
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You can look at paint material dollars in a couple of different ways – the price you pay on the jobber invoice – the expense – or the amount you use on a job – the cost. The problem with looking at the expense is it’s difficult to realize the value. To see the true value of a product you need to determine your cost per paint hour.

Let’s take a gallon of clear for instance. You can purchase clear from your jobber at several different price points, generally ranging from $125 to $250 a gallon. At first glance, you might think the lower priced clear is a better value.

However, by reviewing your job cost on the lower priced clear you found the painter was only able to get 40 to 45 paint hours per gallon. Checking your job cost on the higher priced clear you see that your painter completed 85 to 90 paint hours per gallon. Comparing the two by cost per paint hour, the lower priced clear costs about $3.12 while you only spent $2.94 for the higher priced clear. 

As you can see, the higher invoice price brings better value because it has a lower cost per paint hour. Using this example, the price on the jobber invoice should only be used to issue payment. The cost per paint hour presents a better example of what you are truly spending. As you validate your cost per paint hour on the remainder of your liquid products through job costing, you will see the value in the expense and reduce your paint cost overall.

Job costing isn’t new, it’s just not focused on as much as it should be. Most paint mixing systems have the option of recording paint mixes by repair order. Requiring your painters to mix liquids by repair order is the first step in job costing. Ensuring all liquids used on a repair are measured will help determine the total cost of products used to complete the repair. By dividing the cost of products used by the paint hours documented on the damage appraisal, you can determine your overall cost per paint hour.

The added benefit of job costing is identifying waste. As you review the scale report, you can determine if too much product was mixed. I was helping a customer review some job costs and found examples where the cost per paint hour was way too high. As we reviewed the mixes, I found a job where the painter had originally mixed 20.8 ounces of clear, which based on the panel calculator was the correct quantity. However, just below that we saw the painter mixed an additional 18 ounces of clear. We printed that mix report so we could discuss it with the painter.

The next step in job costing is to compare what was consumed to the amount calculated for reimbursement on your damage appraisal. Once you have validated your paint mix and found you have spent more for product than the amount on the damage appraisal, you will need to create an invoice. You can use that paint system generated invoice to validate the added expense allowing you to gain reimbursement for the difference. Adding a manual line to your damage appraisal will allow you to negotiate with the paying party.

Remember that the price on the jobber invoice is just that, the price. Take advantage of the tools available to you to determine your true cost of products used and to ensure you are getting proper reimbursement. I can assure you as you monitor your job costs, you will see an increase in gross profit.

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