How to Leverage Auto Repair Shop Accounting Software

For many shop owners, the accounting side of business can be overwhelming. If you want your business to succeed over the long haul, your financial statements need to be complete, consistent, and comparable.

Complete Statements

You should account for all transactions, including sales, expenses on parts and labor, taxes, warranties, refunds, cores, and any other transactions. All relevant information such as dates, purchase order numbers, and vendor names should be included on each statement. Complete statements give you a clear idea of how much money you have to invest back into your business at the end of each sales cycle.

Consistent Statements

Maintain a regular schedule and method for tracking your business's income and expenses. It's good practice to check your numbers at least once a month and conduct a thorough reconciliation and analysis of your books at least once every business quarter. Regularly checking your statements helps you catch errors or losses quickly.

Comparable Statements

Comparable financial statements help you spot trends and make better business decisions. You should be able to cross-reference your financial statements with purchase orders, receipts, and other financial reports. Consider how the financial data in your shop management system interacts with your accounting software.

"What Are My Margins?"

Shop owners should always ask, “What are my margins?” To invest in new tools, talent, or locations, you need to know your actual income after expenses. Track your margins in both your shop management system and your accounting software. Shop management systems provide a good baseline, but accounting software like QuickBooks gives you the actual margins, factoring in items like paid time off, benefits, and payroll taxes.

How to Divide Sales & Expenses

Simplify your accounting by dividing sales and expenses into categories:

• ​Parts
• ​Labor
• ​Shop supplies
• ​Sublet work

These categories form the basis of your profit and loss statements. Shop management systems and accounting software can help automate this process.

Tekmetric’s Financial Reports

Tekmetric provides several customizable financial reports. The three most important are:

• ​End-of-Day Report: Shows Average RO in Sales and Profits, Profit Margin, Gross Sales, and Gross Profit for any date range. It provides a forecast of your shop’s earnings but may not include all revenue and expenses.
• ​Parts Purchased Report: Details parts purchased, including name, vendor, PO#, RO Source, date purchased, quantity, unit cost, total cost, and ordering employee.
• ​Parts Usage Report: Shows when each part was used, job title, job category, RO number, customer and vehicle, and technician.

Using Tekmetric’s Parts Reports with Accounting Software

Comparing Tekmetric’s reports with QuickBooks helps you reconcile inventory and financial data. For example, if you purchased 100 oil filters but only used 25, investigate possible reasons such as unlogged parts, theft, or unused inventory. Regularly comparing these reports helps identify discrepancies and prevent future issues.

Best Practices for Managing Parts

• ​Train Service Writers: Ensure service writers follow parts ordering and documentation guidelines. Require logging of all parts ordered and used.
• ​Adjust Parts Matrix: Update your parts markup matrix when you get better deals to maintain appropriate profit margins.
• ​Regular Reviews: Review parts information in QuickBooks and Tekmetric at least once a month to ensure consistency.

Common Questions About Parts Management

Q: What’s the best way to understand what my shop spends on parts?

A: Compare the cost of goods sold in QuickBooks with Tekmetric’s Parts Purchased Report. For shops with fluctuating inventory, add inventory added to assets in QuickBooks for a more accurate picture.

Q: Should I enter each part I purchase into QuickBooks?

A: Not necessarily. Entering invoice totals is usually sufficient for most shops. Only log every part if you’re dealing with inventory or management issues.

Q: If I need to enter each purchased part into QuickBooks, how long and how often should I do this?

A: Set a deadline (e.g., three months) and a regular schedule (daily, weekly, or monthly) to avoid disrupting workflow. Use this period to improve inventory and stock management practices.

Q: When should I switch from cash basis to accrual basis accounting?

A: Switch to accrual basis when your business grows more complex, with larger orders, more jobs, and additional team members. Accrual accounting allows real-time logging of income and expenses.

Minimizing Financial Discrepancies Between Platforms

A shop management system like Tekmetric helps track purchases and sales, but this data must align with your accounting software.

Labor Gross Profit Margin Discrepancies

Labor gross profit margin may be higher in Tekmetric than in QuickBooks due to differences in how technician pay, benefits, and payroll taxes are accounted for. To minimize discrepancies:

• ​Use integrations like Back Office’s Accounting Link to transfer data accurately.
• ​Ensure service advisors assign costs and technicians to each job in Tekmetric.
• ​Adjust technician hourly rates in Tekmetric to account for overhead costs.

Parts Profit Margin Discrepancies

If parts profit margin is higher in Tekmetric than in QuickBooks:

• ​Pull the Cost-of-Goods report in QuickBooks and compare with Tekmetric’s Parts Purchased Report.
• ​Investigate discrepancies by vendor or transaction.
• ​Ensure every part paid for is matched to a paid ticket in Tekmetric.
• ​Conduct regular spot checks to catch issues early.

Becoming Proficient in Accounting

Accounting can be intimidating, but with experience, you’ll learn to analyze discrepancies and make informed decisions. Train your team, focus on small wins, and continue learning to secure the best profit margins for your shop.