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Work-In-Progress (Days) (Bodyshop)

WIP Hours ÷ # of Prod's ÷ Hrs Attended in 1 Day

Benchmark: 5 days or less

Description:

Work in progress (WIP) simply refers to the number of hours that have been booked onto jobs that have not yet been invoiced.

This vital KPI informs you of the number of days Work In Progress that you have accumulated.

Example:

A) Hours booked as WIP = 216
B)# of Productives = 6
C) Hours Attended in 1 day = 8 (Per Productive)
D) Work In Progress Days = 4.5 Days (A ÷ B ÷ C)

Discussion:

Many financial reports have a tendency to provide WIP as a total monetary value, but this can often be misleading. You must ask the question, is it reporting a value based upon the Labour Cost of Sales, Hours Sold at retail value, or Hours Sold at the current recovery rate?

The example above just deals with the number of hours accumulated in WIP and this is therefore more useful in trend analysis and deals with all eventualities.

Related Terminology:

Work-In-Progress (Days) (Service Department)

WIP Hours ÷ # of Tech's ÷ Hrs attended in 1 Day

Benchmark: 3 days or less

Description:

Work in progress (WIP) simply refers to the number of hours that have been booked onto jobs that have not yet been invoiced. This vital KPI informs you of the number of days Work In Progress that you have accumulated.

Example:

A) Hours booked as WIP = 120
B) # of Technicians = 6
C) Hours Attended in 1 day = 8
D) Work In Progress Days = 2.5 Days (A ÷ B ÷ C)

Discussion:

Many financial reports have a tendency to provide WIP as a total monetary value, but this can often be misleading. You must ask the question, is it reporting a value based upon the Labour Cost of Sales, Hours Sold at retail value, or Hours Sold at the current recovery rate?

The example above just deals with the number of hours accumulated in WIP and this is therefore more useful in trend analysis and deals with all eventualities.

Related Terminology:

Working Capital

Current Assets x Current Liabilities

Benchmark: See Current Ratio

Description:

Working Capital is the value of money that is used to run your business on a day-to-day basis, It's the money that is inevsted within the part of your business where you buy and sell your products and services. Working capital is not contained within your proprty or any other Fixed Assets.

The calculation for Working Capital is conducted from the Balance Sheet and is simply Current Assets minus Current Liabilities. This will provide you with the value of Working Capital currently available.

However, this equation does not inform you of whether the value of Working Capital is sufficient to sustain the business on a day-to-day basis.

If your business were a human body, then cash would be its blood. You need just the right amount to sustain life; too much and you might cause a haemorrhage, too little and you die.

Example:

A) Current Assets = R850,527
B) Current Liabilities = R654,251
C) Working Capital = R196,276 (A - B)

Discussion:

To assess whether you have just the right amount, you need to calculate the Current Ratio or Working Capital Ratio.

Related Terminology:

Working Capital Ratio

Current Assets ÷ Current Liabilities

Benchmark: 1.25:1 - 1.3:1

Description:

This KPI informs you whether the value of your Working Capital is enough to service your business. It's rather like the company's blood pressure test.

The calculation for Working Capital Ratio is conducted from the Balance Sheet and is simply Current Assets divided by Current Liabilities.

This example below is showing a Working Capital Ratio of 1.3:1, which means that for every R1 of Current Liability you have R1.30 in Current Assets.

We need this amount of cover because the nature of our business dictates that our stocks are always suffering the effects of depreciation and as an industry, we have the tendency to pay out money at a faster rate than we receive it.

Example:

A) Current Assets = R850,527
B) Current Liabilities = R654,251
C) Working Capital Ratio = 1.3:1 (A ÷ B)

Discussion:

This KPI is also known as the Current Ratio and is one of the most important ratios to monitor to ensure that you have enough cash available on a day-to-day basis to enable your business to function properly.

Related Terminology:

Working Efficiency % (Bodyshop)

Hours Sold ÷ Hours worked Productively (x100)

Benchmark: 110% to 125%

Description:

This KPI shows you the Productivity and Working Efficiency. It shows you the Productives ability to complete their work within the agreed hours provided by the Estimator.

Example:

A) Hours Sold = 1,083
B) Hours Worked Productively = 958
C) Productive Efficiency = 113% (A ÷ B X 100)

Discussion:

When a customer brings a vehicle to your Bodyshop for repair you provide them with an estimate that states the number of hours to be charged. This allocated time is the maximum amount that you are able to charge.

In order to make gains in profitability, your Productives must complete the job in a lesser time than is allocated by the Estimator, thereby increasing your Productive Efficiency %.

Productive Efficiency is a double-edged sword. If you take more time to complete the job then your Productive Efficiency falls below 100%.

Related Terminology:

This KPI is also known as Productivity and Working Efficiency.

Working Efficiency % (Service Department)

Hours Sold ÷ Hours worked Productively (x100)

Benchmark: 110% to 125%

Description:

This KPI shows you the relationship between your Technicians speed in completing jobs and the abilities of your Front Counter staff to sell the hours to your customers.

Most franchise manufacturers provide dealers with allocated times for jobs on all vehicles and this allocated time is what the Hours Worked are usually measured against. The Hours Sold is the responsibility of the front counter staff and they could sell more or fewer hours than the manufacturers book times.

In order to make gains in profitability, your Technicians must complete the job in a leser time than is allocated by the manufacturer, or the front counter must sell more hours on the same jobs, thereby increasing your Working Efficiency.

Example:

A) Hours Sold = 1,130
B) Hours Worked Productively = 957
C) Productive Efficiency = 118% (A ÷ B X 100)

Discussion:

Working Efficiency is a double-edged sword. If your Technicians take more time to complete the job than the manufacturers allocated time then your profitability diminishes and Working Efficiency falls below 100%.

Related Terminology:

This KPI is also known as Productivity and Productive Efficiency.