1. Government Policy – This writing is not intended to be political. It’s meant to be a recognition of the cause-and-effect relationship between government policy and the environment we live in … Read More >>
2. Inflation– The impact of inflation on our lives at this time is readily apparent. Any time we fill our cars up with gas or go to the grocery store we directly feel the effects … Read More >>
3. The UAW Strike – At the time of this writing the United Auto Workers Union is on strike. The strike has entered its second week and has expanded from three locations affecting about 13,000 employees to 38 locations affecting an estimated 18,000 workers  … Read More >>

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When the pandemic occurred – businesses were shut down and people were isolated. This resulted in a huge decrease in economic activity. To compensate for this a great amount of government spending ensued in the form of Covid relief funds. Businesses were provided with funds to assist in staying open and retaining employees. People were paid to stay home. This resulted in a major increase in money in the economy which in turn caused an increase in demand for goods and services. At the same time the forced shutdowns resulted in supply chain disruptions which caused a reduction in supply. When demand exceeds supply inflation results.

In times of inflation the Federal Reserve will increase interest rates thus tightening the money supply. The intended effect of reducing the money supply is to reduce demand thus cooling inflation.

The push for green energy and electric vehicles is having an impact on gasoline powered vehicle production. As electric vehicle usage grows – labor and part requirements for automobiles will diminish. This policy combined with inflationary pressures has brought on a strike by the united Auto Workers Union.

The current economic environment presents significant challenges for the automotive repair industry. Costs are up and customers are faced with resource constraints. Auto repair shop owners must be very diligent in managing their way through this. Extra care must be taken to control costs and remain profitable.

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In economic terms inflation is tied to supply and demand. Economists say it’s a result of “too many dollars chasing too few goods”. Most economists lay the blame for increased demand on excessive government spending. The term ‘Deficit’ refers to the amount the government spends over and above the money they take in for any accounting year. This amount gets added to the federal debt. The last time the federal government spent less than it took in was 2001. Since then, the government has run at a deficit in the billions every year. When the Covid pandemic hit – the amount of deficit spending increased dramatically to the point that over 7 trillion dollars was added to the debt in three years. It can be disputed whether these actions were the right thing to do or not but adding this much money into the economy leading to a sharp increase in demand is apparent.

For years OPEC (Organization of Petroleum Exporting Countries) have set the price of oil by controlling supply. To generate a price increase they decrease production. In 2019 the United States reached the point of energy independence and the price of oil decreased to $64 a barrel (pre-pandemic). At the time of this writing the price of a barrel of oil is $96. That’s a 50 percent increase. This results in higher gasoline prices which ripple through the economy. Not only does this result in higher prices at the pump but everything that needs to be transported (such as food) is affected. All petroleum-based products including fertilizer or anything rubber has increased in price.

The impact of inflation on the automotive repair industry results from a number of factors. Vehicle owners are feeling the pinch as they can buy less with the money they have. In times like this people will delay having work done on their vehicles. Costs are increasing in terms of labor, parts and operating expenses. When these costs are passed on to customers it can result in a drop in sales. The cost of capital is higher due to increased interest rates causing the cost of equipment and machinery to be higher. The impacts of inflation on an automotive repair business are numerous and together they present a challenge that can only be dealt with through diligent and effective business management.

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The strike was brought on by two major factors – inflation and the push toward electric vehicles. Inflation has the immediate impact of rising prices for everyday living expenses coupled with increasing interest rates which make major purchase such as homes and new cars less affordable. The push toward electric vehicles portends a future in which there will be much less work for auto workers. Thus, the UAW wants a new contract for its members that compensates for these factors. The UAW strike primarily affects the big three automakers – Ford, GM and Stellantis (Chrysler). One potential impact on the automotive repair industry could be in supply chain disruption and parts availability. There’s no telling how long the strike will last but the effects will be felt and the quicker the union and companies reach an agreement – the better.

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1. The chart of accounts is the heart of accounting for any business including automotive repair. A familiar saying is that “Accounting is the Language of Business” … Read More >>
2. Accounting Subledgers and Operational Management Systems feed General Accounting Systems. A subledger contains the detail of a certain area of business activity while the general accounting system reflects a summary value of the business activity … Read More >>
3. Financial Statements are the primary output from an accounting system. The balance sheet and profit and loss statement provide a picture of the status of a company at a given point in time … Read More >>

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1. The Double Entry System – This is an accounting system that uses a two-sided entry to maintain financial records. Each dollar amount that is posted to one or more accounts has corresponding entries to one or more other accounts. One side of the entry is comprised of debit values and the opposite side consists of credit values.
2. Balance Sheet Accounts – These accounts are used to maintain activity for a company’s asset and liability accounts as well as owner equity accounts. An example of an asset account would be ‘Cash in Bank’. An example of the corresponding account in the double entry system would be ‘Sales’. As money is received by the business – the balance in the cash account is debited and the sales account would be credited. An example of a liability account would be ‘Accounts Payable’. This represents money owed. An example would a parts purchase in which the asset account would be Inventory. When parts are purchased – inventory would be debited and accounts payable would be credited.
3. Income Statement Accounts – These accounts are those that appear in a company’s profit and loss statement. Examples of income statement accounts are revenue and expense accounts. Income statement accounts are sometimes referred to as temporary accounts because at the end of an accounting year their balances are zeroed and posted to balance sheet accounts.

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1. Accounts Receivable – The accounts receivable subledger contains the detail of what is owed by customers that have payment terms and don’t pay at the point of sale. Charges and payments are posted in the subledger and the summary of the balance is kept at the general accounting level. The accounts receivable subledger is often part of the operational management system or Auto Shop Management Software.
2. Accounts Payable – The accounts payable subledger contains invoices from suppliers and the payments posted to them. The summary balance of this subledger appears in the General Accounting System. Often the accounts payable subledger is part of the Auto Repair Shop Software system and is sometimes referred to as the ‘Vendor Invoicing System’.
3. Operational Systems – For an Auto Repair Shop – the operational system is often referred to as ‘Auto Repair Shop Software’. Although it does much more – one of the purposes of this software is to support accounting. The primary accounting areas affected are sales and expenses (or cost of goods sold).

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1. Balance Sheet – This financial statement reports an auto repair shop’s assets and liabilities at a specific point in time. The assets are what the company owns and the liabilities are what the company owes. It can be used to determine different measures – most commonly the debt-to-asset ratio. This is calculated by dividing the total liabilities by total assets. A ratio that reflects assets higher than liabilities generally depicts a healthy balance sheet.
2. Profit and Loss Statement – This financial statement is a summary report of revenues, costs and expenses for a given accounting period. The report depicts the relationship between revenue and costs and the ability or need to generate profit by increasing sales, lowering costs or both. The profit and loss statement (or P&L) is a very important tool in financial management.

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1. The Service Advisor Process – The service advisor engages in the direct dealings with the customer. From the time that the engagement takes place – the service advisor must ensure that the repair opportunity is managed to make the best use of the technician’s time… Read More >>
2. The Technician Vehicle Repair Process – The integrated repair process should be tightly connected to the technician’s activities. Each stage of the repair process should be recognized as being ready to start, in progress or complete … Read More >>
3. The Parts Management Process – Parts management is an integral part of the auto repair cycle. In order to be efficient in managing vehicles through the repair process – focus must be maintained on parts and each related status must be visible to shop personnel … Read More >>

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1. Quote – Often a visit from a customer begins with a quote. When providing a quote for a prospective customer – the shop should have the contact info for a customer and a follow up should be part of the process. It’s always beneficial to know the reason that business was not earned so corrective action can be taken. It’s also beneficial to know the reason business was earned.
2. Appointment – When a customer schedules an appointment it’s important to know what the customer wants to have done. This allows as much planning and preparation as possible to be done. Resource planning such as dedicated bays or equipment as well as technician skills can be planned for. Parts for known service requirements can be purchased in advance. These actions will improve productivity in the repair process. Assigning the technician to the appointment will support advance scheduling.
3. Check In – Vehicle check in is an opportunity to confirm the required repairs and possibly to identify additional requirements. The preferred contact method for the customer should be established and approval for the initial repairs should be obtained. In the preferred set of circumstances, the vehicle will move from check in directly to the shop floor where repairs can begin.
4. Additional Repair Approvals – The initial stages of the repair process may involve an inspection and/or diagnosis during which additional repairs are identified. If both an inspection and a diagnosis are performed it’s best to wait until both are done before contacting the customer. This is not always possible as the time required for a diagnosis can vary. Obtaining approval for the additional work must be done expeditiously so that needed parts can be procured and work can begin as soon as possible after initial known repairs are completed.
5. Work Completion – Once the technician finishes work on the vehicle – quality control and any other post repair items will need to be completed before turning the vehicle over to the customer. The vehicle should be ready before the customer is contacted and vehicle delivery should be scheduled.
6. Vehicle Delivery – When the vehicle is returned to the customer any declined services or recommendations should be reviewed and the customer should be encouraged to make an appointment. The vehicle delivery step is an opportunity for relationship building.

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