Managing Billable Hours in Your Heavy Duty Truck Shop
Have you ever given an estimate on a job that ends up requiring more time than what was projected? Have you ever looked at the bottom line on a job and realized it was not as profitable as it should have been? Any shop that is not managing billable hours has seen these common issues, however, it’s not as hard as you’d think to fix. Below are three simple things you can do to ensure you are billing the appropriate amount.
Effective Use of Labor Guides
Personal knowledge and experience are an asset in any shop, but they are not always accurate when it comes to keeping up with the industry standards. Using labor guides in your shop can be a very effective way to ensure you are charging the correct amount of labor for each job and to keep your techs productive. Being able to know when techs are taking longer than they should on a job by referencing the labor guide can help you know where you are specifically losing money. Labor guides are not only handy for your techs, but also for your service writers who can use them to ensure you are billing appropriate times for each job when providing estimates. It is very important that when your service writer uses labor guides for estimates, they understand when adjustments need to be made. Understanding that wear and tear can cause a simple job to take longer because of unforeseen factors, like rusted bolts, is something that will need to be taken into account when using labor guides. Having both your techs and service writers use labor guides can help with accurate billing and estimates and you will quickly see the results in your bottom line.
Shop Software With Tech Tracking
You cannot manage what you cannot measure. By using software with tech tracking, you can achieve both efficiency and accurate billing to maximize your profits. You might find that one tech is taking double the time to complete a job that it takes other techs to complete. Bottom line is, if you don’t have a way to track these things, you will never know if your shop is as capable as it could be and living up to its true earning potential.
The Lost Minutes Add Up
It’s possible that you follow the labor guides, have a tracking system, but are still not optimizing your billable hours. It’s important to remember that labor guides are estimated for ideal working conditions and software is only as useful as the information that’s put into it. Some shops use tech time tracking and labor guides but don’t take into account working conditions that aren’t ideal. They do this by measuring the time that a tech starts working on a truck, but not the preparation it takes to begin doing the job that’s been assigned. During the winter months, who pays for the ten minutes it takes to get the truck warmed up and into the bay? If you’re not measuring tech time properly, these ten minutes add up to a high monetary value that draws directly from your bottom line. Similarly, once a job is complete, some shops stop the clock there…but who pays for the time it takes to clean up the bay? Again, it’s your bottom line that takes the blow for these kinds of common tracking mistakes.
To put it into perspective, let’s say you have one tech who works on an average of four trucks per day. We’ll estimate that he spends ten minutes warming up the truck and 15 minutes cleaning up the bay, and we’ll assume that these tasks were not billed to the customer. That’s a total of 25 unbilled minutes per unit worked on, which equates to a total of 100 minutes unbilled per day if this tech getting four trucks in and out of his bay. In a five day work week, this tech would be spending over 8 hours doing work that is only billable to your bottom line.
Now let’s assume that those 8 hours over the span of a week were billed to the customer. Assume you charge a shop rate of $100/hour and you pay your tech $30/hour. That’s an additional $800 of revenue and about $560 of net profit per week! This would amount to $29,120 in net profit per year!
More and more shops are now tracking lost minutes, which is a recommended business practice. By optimizing billable hours with labor guides, management software, and taking into account where billable minutes are lost, shops are vastly improving their bottom line net profit.