Service departments

Thursday, August 25, 2011

Q. Why is "Average Repair Invoice" so important?

A. This number will be one of your first indications that you may not be billing for all of your labor. This happens often, especially with wheelchairs. Techs, by and large, are a conscientious bunch, and if they see some minor adjustments that need to be done (wheel locks, footrest height) they will most likely go ahead and take care of it and oh yeah, let's replace that missing cap on the fork while we're at it. While the primary job is routinely billed, it's the little things that often don't get noted by the tech, with this work being swallowed up in a black hole, never to be billed.

This isn't to suggest that the tech is entirely at fault. Other factors: (1) "That's the way we've always done it" (remember when we used to make decent margins when we sold wheelchairs?); and (2), not enough time for the tech to compose several paragraphs of tech-lingo (besides, if they did, would the billing department really understand it and translate it into a solid claim?).

The result, especially with complex rehab, is that we often dumb-down the work that was actually done and reduce the explanation of what we did to something like "replace parts as listed, one hour." Money left on table.

So, how much should the average repair invoice be? You probably won't like this, but it depends. First, you need to know your Cost of Doing Business (CODB) per hour for the repair shop, with all costs loaded, including allocations of other staff providing repair support (CSRs for example) and overhead. And, you need to know the proportion of labor vs. parts for a typical repair.

Armed with that, now we can determine what average repair invoice needs to be and set break-even levels for labor billings. Plus, problem areas will stand out, and the newly-acquired data enables us to set meaningful benchmarks accurately aimed at improving financial performance in repair.  

Next month we'll guide you through the process of determining CODB.

Dick Fuller is the owner of Richard Fuller Consulting. Reach him at or 636-451-6220.