Chris Collins and Cliff discuss why dealerships end up with high unapplied labor costs. They walk through common accounting mistakes that let labor hours slip away unbilled, and how to fix the systems that let it happen.
So the first part of this is you really should get a detailed list of what is charged applied labor, which if you've never done that before, you can just ask whoever is the office manager or does the accounting, hey, can I see the detail? That's how you'd word it, the detail for unapplied labor. And you might, if you've never asked the first time, you might be surprised what's in there. Yeah, sometimes you don't have an unapplied labor problem. You have an accounting problem.
Yes. And if you haven't asked, no one else has looked.
That should have been, that should have been number one on our list. And we're going to Change this from 4 to 5.
Okay.
And the first one on the list is accounting errors.
Yep, that's good.
And I would say.
That is more common than you would want to.
And admit.
And not because people are purposely doing.
No, nobody's looking at it.
And yeah, no one looks at it and saying. I. I think it's also important to point out that this was the second list that we came up with for. Well, we. The second list that was brought up suggested for this episode today. The list that Chris thought was, can.
People that are listening to this see you do that weird thing with your head?
I think they hear because my hair hits off the side. But wasn't it advisor like pulling his.
Neck out, pointing at me with his head. Okay, what's your point? This is the second list.
Yeah, the second list is the unapplied labor. The first list was Chris wanted to go through advice service advisors, favorite lunches.
Oh yeah, no, no, I wanted to go through like 2024, like how they should take care of themselves.
The list we came up with was not taking care of them at all.
Well, that was your list. That wasn't my list.
Oh, that's true.
Okay, continue on because I, I do think about that. When I was an advisor, I like had a whole workout routine. I had meal prep, the whole thing.
Yeah.
Okay. So number one is accounting errors. You got to get the detail of what is there so you understand what's going on.
Yeah.
You also, when you're looking at the detail, you're. You might have to look at the technicians.
That are hourly or quick lube or unproductive and see where they're being charged because a lot of people do.
That different and the ones that are flat rate make sure that they're costed properly in the system too. So I've seen a lot of cases where in the system a Flat rate tech is flagged at 23 in the system, but they're really paid 30. So there's $7 in unapplied labor for everybody every hour that they flag to. So I've seen it where there's just kind of like dotting the eyes, crossing the T's portion. Don't assume that all that stuff's right because chances are no one's looked at it for a long time.
Yeah. And so. And let's talk about that really quick. Why do they do that? Why do they set them up at 30 when they're making 20?
Well, that's a, that's a little different. But 30 at 20 is actually trying to. To essentially over allow in the instance that there would be unapplied labor so that it minimizes that. Right.
Who else does that in the dealership?
Probably salespeople.
Parts.
They do that with their parts. Employees?
No, they'll do it with their parts. So your inventory and service is your tax. But they will, they will put stuff into inventory with a little vig on.
There, a little bump, $32 instead of.
To manipulate their inventory of parts. Managers do that.
Oh, my gosh, I love that you made that connection.
Yeah, Cliff.
So the inventory is overvalued just with a vig.
Oh, that's really good.
But you only find that stuff out by asking. And like you want to see it on paper because that's the other thing. And I don't think, I don't think office managers are malicious. They have so many things to worry about in so many charts of accounts in so many.
Places, things can go and be wrong. And so whenever I'm looking into this sort of thing, I want to see it printed out. Don't tell me. I don't even, I don't even ask for them to tell me until I have it printed out and then I ask them to explain. But they will tell you the idealized version and you're not any better off unless you see it printed out. So you want to see a detail of the payroll most of the time and what is in unapplied labor. But the. You're going to find a bunch of different ways, like people are charged there that shouldn't be, they're costed wrong and that can go up or down. They could also. This happens often. You give technicians a raise and they don't change it.
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That's 8333 Ask SDR. For special deals on our books and training, head over to offers.chriscollinsinc.com now that's offers.chris collins, inc.com I'm Chris Collins, and I'll see you in the next video.
