Cash Flow

by Art Little

This article appeared in the August 2013 issue of Transmission Digest.

Managing a transmission shop is one of the hardest jobs anywhere if you do it right. It is even harder if you don't. There are management jobs in other industries that pay twice as much and do not require half the effort .Until you sit in the chair and do it, you will not truly understand how hard it is.

The last two articles have dealt with lead flow and work flow rules of engagement in the war against poor organization and low shop productivity. As we discussed, knowing the lead status and work status of all customers is just the beginning. That knowledge only puts the manager in a position to make the right production decisions.

In this article, we will take a look at cash flow. We will discuss what it takes to develop a good production strategy so that cash will steadily flow into the bank without delays caused by poor planning. There are two parts of the game. Leadflow deals with getting the vehicle into the shop. Workflow has to do with getting the vehicle out of the shop.

If knowing the status of every customer puts the manager in the right position to make the right production decisions, then what are the right decisions ? Making the right decisions start with understanding that work in progress has 4 categories.

New jobs -These are new leads that are at the shop that need to be sold.

Money jobs -these are jobs that have been sold and will pick up when the work is done.

Warranty jobs - I think we all know what this is.

Jobs on Hold - These can be new or warranty jobs that are put on hold.

It is the managers job to look at the jobs in these categories and figure out what he wants first , second, third and so on. Once he knows his work order he then can issue work assignments to the technicians.

He monitors the work as it progresses through the shop and changes the work assignments as the situation merits. That is where it gets a little tricky.Things happen. Employees miss work. Customers do not call back. Vehicles do not get picked up when they are finished. Parts houses send the wrong parts Transmissions rack yo yo. All of this and more is happening and he has to figure out how to get the bills paid this week and keep everybody happy happy. That is when the he earns his money.

The manager has to be a good quarterback. He has to call the plays and lead the team. He is the only one who knows the true situation with the customer because he has first hand information regarding the customer and the work being done on the customers vehicle.

Nobody else has that. He knows what the customer said, what the parts salesman said, what the builder said and what his workload is. He has to take that information and manage each situation individually. He has to do that with all of his customers and make decisions regarding the work order as situations change in the shop. And, they do change. It is a real balancing act.

Let me offer up some basic production management policies and procedures that will establish a game plan and help the manager be a good quarterback.

• Do not delay diagnostics. If a customer calls with a problem, create an urgency with the customer and schedule the diagnosis immediately. That includes warranty work.
• Keep a lift free for diagnostics. A.B.S Always Be Selling. Having a lift free makes it easier to consistently comply with this sales policy.
• 30/30 rule. Begin the diagnosis within 30 minutes of the vehicles arrival. If it takes longer than 30 minutes to diagnose the vehicle, stop.The manager then has the option to charge an extra fee for the diagnosis or perform the diagnosis at no charge. This policy sets a goal to have most of the diagnostics completed within one hour of arrival.
• Perform a complete diagnosis on every vehicle. Do not short cut the diagnostic procedures.
• Technical calls should lean toward the most logical solution and not the fastest solution. Do not treat the symptoms and ignore the core problem.
• Give warranty jobs the same priority as new jobs. Check it out within an hour and If it is a minor, fix it on the lift. If it is a major, pull it while it is on the lift.
• Have one diagnostician. He diagnosis the vehicle when it arrives and does the final road test before it is delivered.
• Make a decision. The worst decision you can make is to not make a decision .
• Avoid delays. Sell the job as soon as you have the diagnosis. Order parts as soon as the job is sold. Contact the customer as soon as the final road test is completed.
• Keep a daily eye on parts costs. Know what your parts costs are and avoid an unexpected end of the month parts bill
• Control the customer. Stay in touch with the customers so they will be ready to come and pay for and pick up the vehicle when the work is done.
• Work as a team. Everybody does their job individually and as a team. Communication is the key here.
• Know what your employees are capable of and make realistic workflow plans that they can accomplish.
• Have production meetings every morning. Huddle up every morning and make a game plan. Make sure everybody feels like they are part of the team.
• Set daily and weekly production goals Once the goals are set by the manager it becomes a team effort to produce and reach those goals.
• Do not pull employees off of their work assignments unless it is a true emergency. Managers do that to get customers off their backs most of the time. Try to handle the customer until the employee finishes his assignment. This policy will expedite production and keep warranty work down.
• Record sales and parts cost on each customer to make sure the proper profit margin is there on each job.
• 1st half / 2nd half It is like a game with two halves. The first half is to retain the vehicle. The second half is to repair the vehicle. Priority should be given to retaining the vehicle in most cases. You do not get a chance to fix it if you do not retain it.

One of the big benefits of keeping up with lead status and work status is that it allows the manager to predict when cash is going to be collected. It allows him to plan a strategy and then follow the money jobs through the shop and know what day the money will be collected.

As a shop owner , if you know what day your money jobs are going to deliver it gives you more control over your business and makes it easier to know when you are going to be able pay your bills. If you are a manager working on commission, that knowledge allows you to predict what your paycheck is going to be. Just the piece of mind of knowing where the money is , makes the process worth the effort .

It takes a team effort to make money. The manager has to make sure there is money coming in to run the business. He has to know what is being spent and what is being collected. Sales need to be recorded. Parts costs need to be kept up with. Accounts receivable need to be worked. Work assignments have to be issued.

Technicians have to work as part of the team to achieve maximum shop productivity. The diagnostician should stay up on the diagnostic procedures and work closely with the manager and builder. The installers need to work clean and bring any issues they see to the manager's attention. The builder is the lead technician and has bottom line responsibility on all technical issues. They all have to bond as a team to maximize cash flow through the shop.

A shop owner has his job to do too. He has to make sure the manager has what he needs to manage the shop. Only the owner can do that. The manager needs the owner to back him up and support him in every way. Trying to manage a shop with all the modern technology and 100% cooperation from everyone is hard enough. It takes leadership and teamwork to be successful. If the shop owner is not supporting the manager as the leader of the team 100% , he is creating a roadblock to his own cash flow.

Today's customers are smarter and more demanding than ever before. Our managers deserve a lot more respect than we give them. They should at least be able to expect cooperation among team members and ownership so that the cash they control can flow through the shop without delays.

Somehow, it seems like the manager always gets the blame. The next time you start to complain about the manager remember, it is a tough job and he is just part of the team. My advice is to get off his back and get on his side. Help him keep the cash flowing. It pays to be a good teammate. Remember, when the leads flow, the parts flow. When the parts flow the work flows. And when the work flows, the the cash flows.

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