By Jay Doyle, Reynolds Consulting Services

How effective and efficient is your technician payment process? Technician compensation plans are complex, varying, and time-consuming to track and administer. This can foster ongoing problems.

The work-in-process fund is compensation paid to technicians for repair work performed but not necessarily collected yet on a repair order. Many dealers struggle with reconciling their work-in-process account. When not accounted for consistently, it affects gross profit labor dollars.

Listed below are the most common forms of charging customers and paying technicians:

• Charge customers a labor amount based on time for work performed.
• Pay technicians an amount based on a flat rate or predetermined time spent working on a vehicle.
• Calculate technician pay based on time entered on their daily time sheets.

What Can Go Wrong
Unfortunately, sometimes problems happen. A dealership might pay a technician:

• More than what is entered on the repair order.
• Before money is collected from the customer.
• Partial-pays spanning pay periods.

These problems lead to discrepancies in the dealership's work-in-process account. If you track this account more effectively and consistently, you can better understand the ultimate effect on the dealership's profitability with labor sales.

How to Make It Right
You can solve this problem by automating and customizing the process by activating and closely managing technician-to-payroll integration. By doing this, your dealership can easily track the money spent in this area. Be sure to consider these items to better control where the dollars are being allocated:

• Establish proper accounting and technician system setups.
• Ensure accuracy and simplicity in the technician payroll calculation.
• Use the accounting work-in-process schedule to capture money paid to the technician and collected on the repair order.
• Put processes in place to help you efficiently manage and deal with problems as soon as they arise. This is so much easier than waiting and having to reconstruct what happened.
• Use work-in-process reporting to reconcile money spent on technician payments on open repair orders; this should get measurably better.

By having these consistent processes in place, you will plug many existing leaks. You'll also benefit from improved work-in-process accounting accuracy, faster payroll processing time, and eliminated profit loss. In any process, the best results are achieved when every step is running at the optimum accuracy.

Jay Doyle specializes in fixed operations and overall business consulting with Reynolds Consulting Services. He has 5 years of retail automotive experience and has worked at Reynolds for 29 years.