By Eric Dreisbach, NADA, Academy Instructor

Do you pay attention to Work-in-Process? If not, you should. The best way to monitor this is to have this account on a schedule controlled by the RO number. (See my previous post OPINION: Why I Disagree with Work-in-Process (WIP) Accounting)

How does the schedule work? When the RO is posted, the cost of the technician’s labor is posted as a credit for each repair order. Then, usually through the payroll process, the technician is paid with an off-setting debit balance for each RO, resulting in a zero balance for the appropriate control numbers. A hanging balance on the schedule indicates an error. If you don’t have WIP on a schedule, errors are difficult to detect.

Here are some common reasons for errors:

  • Tech pay raise is recorded in the payroll settings but is not updated in the service settings. This will typically result in a growing debit in the account
  • Tech bonus pay posted to WIP but not costed on the RO. I recommend using a separate account for tech bonus pay. You may use a cost of sale account or another payroll expense account. This makes it easier to track and will keep it out of WIP.  Use caution since this may impact the service manager bonus.
  • Hourly technicians may be costed out on the RO but paid out of other salaries and wages. Check your DMS settings.
  • Wrong technician flagged on the RO. Tech 23 vs. Tech 32 for example.
  • Miss-flagged/miss-posted pink tickets. Sometimes .3 can look like .8
  • Unapplied labor posted as regular flat rate pay. You may flag a tech for work not costed on a RO, snow removal for example.
  • Excessive open RO’s. Repair orders should be closed in a timely manner.
  • Fraud. Sometimes only found if you are looking for it.

This is just a short list of some of the most common errors. Have you come across an error or a fraud? I would love to hear about it. Please post your comments below.

Posted by NADA

National Automobile Dealers Association

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