Your Service Department will have a published labour rate per hour, but how often are you able to charge this amount to every customer on every job?
Recovery Rate tells you how much revenue you have actually recovered per Hour Sold as opposed to how much you would have generated should you have applied your full charge out rate.
Example:
A) Labour Sales = R42,240 B) Hours Sold = 870 C) Recovery Rate = R48.55 (A ÷ B)
Discussion:
If
we say that the published labour rate for the above example is R50 per
hour, then if no discount were to be given the Labour Sales would have
been R43,500.
The reality of the situation confirms that you are often forced to provide a discount in some instances, which of course reduces the amount of revenue that you are able to collect. The question is how much money have you managed to recover?
The key to success with this KPI is to capture individual Recovery Rates for each income sector (See Labour Sales Mix) so that you can accurately pinpoint the areas in which discount is being given.