At a time when everyone in this business sees the flaws in the method we have traditionally used to calculate our charges for paint and materials, I cannot understand for the life of me why we haven't all been more insistent on abandoning an obviously deeply flawed method in favor of a reliable method. That is, unless the ones ultimately paying the bill steadfastly refuse to allow a change that could affect their bottom line instead of those of us on the shop side of the issue.
None of us believe the myth that a blend panel requires half as much time as a full refinish, or the silly "partial base, full clear" operation, yet these indefensible reductions in paint labor times and a myriad of others like them, compromise one of the multipliers we use to calculate material charges. Couple that with the regular increases in cost we are subjected to and the fact that it typically takes 4 to 5 years to manage a 10% increase in the rate, we are using two seriously flawed multipliers in our antiquated formula. What about the operations we perform for free, like the infamous "feather, prime and block" issue, or "de-nib and polish"? If you worked for free, you provided the materials for free too. How can any reasonable person expect return on investment on material expense under these conditions and when we know the two numbers we use in our equation are deficient? Don't even get me started on the ridiculous "paint threshold", where more doesn't actually cost more.
I have run my intention to begin material invoicing by one of the major insurers and was met with a very curious response. I was told that no invoice for material charges would ever be considered in my market area because, "It is not usual and customary" ( Or the lame"You're the only one" excuse). So a tangible, real-life accounting of actual material consumption and cost is rejected in favor of an arbitrary projection, using a formula with widely known faults and unless a majority in a market area does the same thing at the same time, it will never change. How does one overcome being stuck in a market with others who may not have enough business sense to know they are losing money or what to do about it if they have realized it, and others who are too timid to rock the boat for fear of losing what they receive by way of insurer steering? Why should those of us who run our businesses as businesses be bullied and forced to go down with those who do not? I'm would like to hear what others think about this.
Comment
Comment by Andrew C. Ikner on November 10, 2011 at 8:50am Thanks for your post, Bill. Applying the [Rate] X [Hours] formula really doesn't make sense. Operators have just gotten used to it, I suppose. But then, the "You are the only one invocing P&M in this market" doesn't make sense either. If it's the right thing to do, why does it matter who else is doing it.
Then there's the "materials are overhead" argument. Makes even less sense. In the definition of "overhead", there's this phrase: :
“A cost or expense that cannot be applied or traced to any specific unit of output."
With a P&M Calculator, like PMCLogic, you can associate the use of a specific material item with a specific repair. Thereby refuting the claim that the item is part of "overhead".
Thanks for keeping the attention on this issue.
Comment by Bill Fowler on November 10, 2011 at 8:35am I was thinking further about this subject last night and I wonder how it would be received if we billed for parts in the same way that we bill for materials. Take the body labor hours and multiply that number by a rate number to come up with a parts bill, nevermind if it is remotely accurate or you actually used any or not. It makes just as much sense, doesn't it?
Comment by Matt Wright on November 9, 2011 at 1:58pm So I have to lose money because "everyone else" does? It wil be tough to get these issues corrected because the shops can't stand together because that's collusion, but individually we aren't "competitive".
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