Parts management is a critical function of any auto repair shop business. The only way to guarantee that you’re making a profit on the parts you sell on repair orders is by having an air-tight system for managing and tracking those parts from purchase to sale to reconciliation. The final step of making sure that each and every parts transaction is accounted for is probably the most important step—and the most misunderstood.
Some of the issues your auto repair shop will run into if you don’t carefully manage parts include:
- Un-billed parts (forgetting to collect payment on parts)
- Inconsistencies between your cost of goods sold and accounts payable
- Inability to track and receive return credits
- Inability to detect theft before it gets out of hand
Many of these issues can be avoided by using purchase orders to reconcile the parts you sell on repair orders.
But many auto repair shop business owners still wonder what some of the best practices are when it comes to parts management. How often should you be reconciling parts payments? Who should take on this task: you, your service advisors, or a dedicated parts manager? How do you make sure you’re getting the best value for the parts you buy and sell? How do you ensure that each and every part is being billed?
Let’s answer some of these questions, and unpack the best practices for parts management.
1. Should You Have a Dedicated Parts Manager?
Many smaller auto repair shops do not necessarily need a parts manager, especially if the service advisors and business owner have a solid process for shopping for parts, placing orders, applying markups, and reconciling parts bills with purchase orders.
But as your shop grows to service more than a dozen vehicles a day, you should definitely consider hiring a dedicated parts manager.
Having a specific person in charge of ordering parts, keeping track of inventory, receiving parts, and reconciling purchase orders will not only free up time for your service advisors to focus on providing excellent customer service, but also ensure that your part’s process stays consistent as your business grows.
A dedicated parts manager can focus solely on all things parts, building out a process that is efficient and replicable, giving your shop more room to scale.
2. How Often Should Your Shop Reconcile Parts Orders?
Taking the time to fill out a purchase order whenever you order a part for repairs should become a daily habit.
It’s true that filling out a purchase order adds a little bit of time to the process when you’re trying to get a customer’s vehicle repaired, but it’s better to take the time then and there, or at least at the end of each day, then letting it pile up for the end of the month.
If you wait until the end of the month to make sure each parts order and payment is accounted for, you could easily miss orders from weeks prior and find yourself stuck with an all-day task, which can really take a toll on your workflow for that day.
Additionally, if you wait too long to focus on managing your finances when it comes to parts, you could find yourself losing money on credits for parts that should have been returned.
3. How Can You Identify if a Part Did Not Have a Purchase Order?
Sometimes when you’re going through your accounting software at the end of the day, week, or month, you may notice a discrepancy between what you think you're making on parts, and what you’re actually making.
This is usually because there is a missing purchase order, or several missing purchase orders, in your accounting system.
By using a shop management system with a parts report, such as Tekmetric’s Parts Purchase Report, you can compare what’s reported in there with what’s reported in your financial software.
If you try to verify by vendor on each system, you’ll most likely find the discrepancy, and then you can work backwards, looking at the parts report for that vendor within your shop management system to find out what purchase orders may be missing in your accounting system.
4. How Do You Ensure that You're Getting the Best Value for the Parts You Buy?
Like anything you buy, it’s wise to shop around.
At the same time, your shop has to order parts in a timely manner so that you can get the car back to the customer as soon as possible.
To split the difference and quickly shop for parts, it’s best to use a shop management system that integrates with multiple reputable parts suppliers.
With the Tekmetric Shop Management System, parts managers and service advisors can quickly look up and compare parts from multiple suppliers directly within the Tekmetric dashboard, without having to open up multiple tabs.
By using a shop management system like Tekmetric, your shop can save both time and money while finding the best deals for you and your customers.
5. How Do You Ensure That Each and Every Part is Being Billed?
The best way to ensure that no parts go un-billed is by having solid processes for both inventory management and adding parts to repair orders.
Doing a full inventory check at least once a week will help your shop identify any parts that are missing and have gone unbilled.
Of course, you want to be proactive and make sure those parts are getting billed before you notice they’re missing.
For this, it helps to train your service advisors to all be on the same page when it comes to how parts are included on repair orders, and that they have clear communication with the customers, the parts vendors, and the parts manager.
Tekmetric: Designed With Best Practices in Mind
Using a shop management system like Tekmetric that has a job dashboard with built-in reminders can go a long way towards ensuring that customers are being billed for parts before they leave with their vehicles.
Because the Tekmetric system integrates with leading parts suppliers, it’s easier than ever to find the best deals on parts for your customers.
Tekmetric’s Parts Purchase Reports are another safeguard for auto repair shops to have visibility into the parts moving through their shop.
This article was written with the guidance of automotive repair industry CPA
Hunt Demarest of Paar, Melis, & Associates, P.C.
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