Cost-cutting always is one of your best profit-raising strategies, especially in often-overlooked areas like administration. When it comes to raising revenues, however, shops are prone to look at improvement opportunities in the production repair process. That's because the methods used to measure labor costs versus production results are easier to obtain. Administrative work, when it isn't handled as efficiently as possible, carries some significant costs.
Administration requirements continue to increase faster than sales and labor rates, resulting in extra stress, increased workloads, overstaffed offices and profit erosion. Insurance companies and computers get the most blame for increased administration expenses, but shops themselves are just as guilty.
Consider the following analogy. What if you had to re-spray every vehicle you repaired five times to deliver the job? You would either fix the problem or go out of business. Now, consider how many times you re-enter or change information in a repair file from the time it is created until the bill is paid and the final paperwork is filed.
During the course of a repair, many shops constantly re-do administrative work. Think of the time spent there, along with the number of times each admin employee clicks on a mouse or strokes the keys on a computer to fix or change information that should have been entered only once. You can streamline these expensive tasks by putting together a comprehensive list of Non-Vehicle-Specific (NVS) services, while determining their costs and establishing pricing based on reasonable profit expectations. Computerized estimating systems have databases that can be set up for NVS charges that usually are manually entered, such as wheel alignments, hazardous waste disposal, mount and balance tire, etc. (Note that although they serve the same function, estimating systems refer to the NVS area of their program differently. For example, CCC Pathways uses the term Parts Code Table, Mitchell refers to theirs as Long Expansions, and Audatex uses Standards.)
Some shops, looking for ways to avoid costly pricing discrepancies, are entering information in the NVS area of their estimating packages with prices they established by compiling the prevailing rate practices of some insurance companies, though most are provided by individual estimators. An NVS pricing structure allows an estimator to select the necessary functions from a menu with a couple of mouse clicks. This places the item and pricing accurately on the estimate, both eliminating inconsistent pricing between estimators and avoiding non-compliance with insurance company agreements.
Troy and Peggy Westerlund, owners of Gale's Auto Body, Blaine, Minn., said their shop is the largest grossing independent single location collision shop in the state. Since they have numerous estimators serving their large volume of customers, consistency in estimating with minimal changes are critical to their success.
Troy believes that focusing on the NVS area of his business has been beneficial. "Organizing the non-vehicle-specific part of our estimating systems has had a positive impact on our business," says Westerlund. "Not only by helping us make sure we are consistent and compliant with our charges to vehicle owners and insurance partners, but also assisting our estimators by saving them time and helping them be more thorough in addressing all the steps necessary to repair the vehicles."
Minimizing effort and maximizing results is your best game plan when it comes to building profits.
