I am sure there have been times in your life when you had to pay taxes on profits that you didn’t think you had earned. And if you did earn it, where had the cash gone? I was listening to one of our coaches, Brian Hunnicutt, explain to a shop owner where the money might have gone. This shop owner was not feeling the money in their wallet. According to their profit or loss statement, they were doing great. So where is the money?
This is not as uncommon as we would like to think. Most of my clients were technicians, not accountants, before they opened the doors. Some might have had management experience, but still no true accounting. So it is not a big stretch to think of a shop owner sitting at their desk, seeing that our financials show one thing and the checkbook shows another; and some owners may be sitting there scratching their heads wondering why.
Take Inventory
Take inventory. We have to know what we started with and where we are now. If you have increased your inventory by $50,000, then it won’t be in your checkbook. That is, after all, 50,000 in real money that is sitting there that was not sitting there before. How many parts have you not sent back that have become inventory by default? How many credits have you not tracked from the vendors? Do you have a way to manage your parts to make sure they don’t become inventory, or worse, grow legs and walk off? Are you keeping a rolling inventory going, where you check a couple of different line items a week and do it in front of the crew? Do it loud and make a big deal out of it when the count is right or wrong. How many parts are being put on vehicles that don’t find their way to the invoice?
Another take on this is parts that the employees, friends and family get their hands on without reimbursing you for them. An air filter or an oil filter, five quarts of oil, a hose clamp, the antifreeze to go with it. All the little items that you have such a hard time charging the customer for that are listed under shop supplies — those are the same items that the people around you take from you without even thinking about it. How many people around you start seeing you making money and think to themselves that you owe them something extra for it? How many times has the junk out back been picked up by the scrap guy and you have not seen the money?
Look at Your Receivables
What about account receivables? Once again, what did we start with and where are they now? Have we written any of them off or has the number just gotten bigger? Are we carrying any of our good customers? You know the ones that have always been good for it.
I had one of my people actually tell me that after a year and a half and more than five different repair tickets, the customer when asked to pay said, “I don’t have any money.” To which my guy responded by asking why she had him keep fixing the car. She answered that since he kept fixing it for no money, it must have been OK to not pay. Back on track, what did you start with and is it bigger or smaller?
Stay Focused on Your Margins
Margins always seem to sneak up on us as well. The normal client starts out with a 25 to 30 percent parts margin and not getting very much if anything on shop supplies. Then we get them up to 50 to 55 percent, and the relief to the checkbook and comfort zone is great. Time passes and they take their eye off the ball. Then they themselves or the service writer starts getting retrained by the customers to discount or just not charge as much, and we are right back into not as much money.
Think about the 80/20 rule that I have written about before and the eight out of 10 customers in a normal shop that do not buy; most of them say their reason for not buying is that they do not have the money. That is the No. 1 objection that my people hear on the front counter, because it is designed to get you to back off of them and not hold the line on the sale. It also trains your writer to not ask for as much or as hard, cutting the margins along the way.
Back debt seems to be the biggest one that we deal with. I have had a client that paid off more than $220,000 in back taxes, debt and fines, and then could not find the money that he owed the back taxes on. It seems that money that does not drop in the checkbook is not money at all sometimes. Money that is in a shoe box, buried in the back yard or sitting at the college with the kids is not money either. The new car or the new equipment is not money as well? In one instance, the new plane that went with the new boat was not money either. But when I had a shop owner park the new Diesel Pusher Motor Home at the shop and then complain about business, the motor home was not even money at that point. Always remember that your customers think they paid for all that stuff, and they are right, so don’t flash it around them.
We in the coaching department at ATI pride ourselves on showing our clients the money. We take great pride in our clients’ wins, and we for sure take their losses very personally. We like to say that you might get the money, but it is our reputation at stake — which we know is our money in the bank. So I beg of you, if you are not feeling the money, please look into your profit or loss statement and see if the fixed expense has gone up. Also take a good look at the money your people are now making versus what they were making. Look at your inventory on all its different levels. Look at your account receivables, and see if you are not footing the bill for your customers. But most of all, look at your back debt and see if it has shrunk at all. Then for good measure, look at your lifestyle and your kids’ lifestyle and see if maybe the money is there.
Money Comes in Many Shapes and Sizes
When it is all said and done, and you want the money, remember that it comes in all shapes and sizes. You should be making sure that you have an emergency fund set up as well, and that it is big enough to choke a horse. Then don’t ever touch it.
We have a very useful checklist that could help show you where the money is, or in the worst case, give you ideas on how to create more cash. For a limited time, you can receive your own copy by going to www.ationlinetraining.com/2014-11.
