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Debtor Days (Bodyshop)

Bodyshop Debtors ÷ Bodyshop Daily Credit Turnover

Baseline: < 45 days

Description:

The Debtor Days KPI is a measurement of the credit activity within the Bodyshop. Its purpose is to inform you of the average number of days that your customers take to pay you.

Example:

A) Bodyshop Debtors = R126,591
B) Daily Credit Turnover* = R2,943
C) Debtor Days = 43 days (A ÷ B)

Note:
In order to calculate the Bodyshop Daily Turnover, you will need to take the annualised Bodyshop Turnover sold on credit and divide that figure by 365 to arrive at a daily sales turnover.

A) Annual Turnover On Credit = R1,074,195
B) Days in 1 year = 365
C) Service Daily Credit Turnover = R2,943 (A ÷ B)

Discussion:

In many cases, customer credit agreements are for 30 days and all too often these credit terms are not fully instigated and your money is outstanding for longer periods of time. An increasing problem within this sector of business is the value of Debtors owed by insurance companies. Due to very lean trading margins, it is critical to keep control of this KPI.

Related Terminology:

Departmental Expenses (Bodyshop)

Departmental Expenses ÷ Turnover (x100)

Guideline: Own Policy

Description:

Typically, Departmental Expenses are shown as a monetary value and in order for you to capture meaningful trend analysis you will need to express them as a percentage of departmental Turnover.

Example:

A) Variable Expenses = R28,655
B) Semi-Fixed Expenses = R143,272
C) Departmental Expenses = R171,927 (A + B)
D) Department Turnover = R573,088
E) Departmental Expense % = 30% (C ÷ D X 100)

Discussion:

Keeping control of Departmental Expenses can be a difficult task unless you fully understand the difference between Variable expenses and Semi-Fixed Expenses.

Variable Expenses are directly linked to sales volume and Semi-Fixed Expenses are not linked to sales volume therefore the actions that you need to take to maintain control is different in each area.

Related Terminology:

Departmental Profit % (Bodyshop)

Departmental Profit ÷ Turnover (x100)

Baseline: > 30%

Description:

Departmental Profit is calculated by taking Gross Profit minus Departmental Expenses. To make sense of this figure it is always expressed as a percentage of Turnover when used for trending as it is the direction of travel that is of most interest to you.

Example:

A) Departmental Profit = R183,389
B) Departmental Turnover = R573,088
C) Departmental Profit % = 32% (A ÷ B X 100)

Discussion:

Related Terminology:

The Departmental Profit of the Bodyshop is also called many other things such as, Direct Profit, Operating Profit and of course the bottom line.

Direct Expenses (Bodyshop)

Departmental Expenses ÷ Turnover (x100)

Guideline: Own policy

Description:

Typically, Direct Expenses are shown as a monetary value and in order for you to capture meaningful trend analysis you will need to express them as a percentage of departmental Turnover.

Example:

A) Variable Expenses = R28,655
B) Semi-Fixed Expenses = R143,272
C) Direct Expenses = R171,927(A + B)
D) Department Turnover = R573,088
E) Direct Expense % = 30% (C ÷ D X 100)

Discussion:

Keeping control of Direct Expenses can be a difficult task unless you fully understand the difference between Variable Expenses and Semi-Fixed Expenses.

Variable Expenses are directly linked to sales volume and Semi-Fixed Expenses are not linked to sales volume therefore the actions that you need to take to maintain control is different in each area.

Related Terminology:

Direct Profit % (Bodyshop)

Direct Profit ÷ Turnover (x100)

Baseline: > 30%

Description:

Example:

A) Direct Profit = R183,389
B) Departmental Turnover = R573,088
C) Direct Profit % = 32% (A ÷ B X 100)

Discussion:

Related Terminology:

Diverted Time (Bodyshop)

Hours Attended x Hours Worked

Guideline: See Utilisation

Description:

Diverted Time means that the Productives have been diverted onto tasks that cannot be charged out to the customer. Typically this could be time spent locating a vehicle, waiting for parts and other such issues.

Example:

A) Hours Attended = 320
B) Hours Worked = 304
C) Hours Diverted = 16 (A - B)
D) Prime labour Cost = R10
E) Diverted Time = R160 (C X D)

Discussion:

The mathematical formula is simply Hours Attended minus Hours Worked and this is always shown as a monetary value, which can usually be found within the Variable Expenses of the Bodyshop.

In addition to this some financial reports might show the monetary value of Diverted Time as a percentage of the Departmental Gross Profit.

Related Terminology:

This term is also known as Unrecovered Time, Idle Time or Lost Time.

Estimate Conversion Ration

# of Jobs from Estimates ÷ # of Estimates (x100)

Baseline: > 80%

Description:

This KPI assesses how many jobs you have gained from the estimates that you have given.

Example:

A) # of jobs from estimates = 262
B) # of estimates given = 304
C) Estimates Conversion Ratio = 0.86:1 (A ÷ B)

More often than not, this KPI is referred to as a ratio, but in terms of reporting format it is usually displayed as a percentage.

The measurement is exactly the same the only difference is that you multiply the result by 100 to convert the ratio into a percentage. It's really a matter of preference.

Example:

A) # of jobs from estimates = 262
B) # of estimates given = 304
C) Estimates Conversion Ratio = 86% (A ÷ B X 100)

Discussion:

In simplistic terms these examples show that for every estimate that you have provided, you have successfully converted 86% of them into jobs for your business.

Related Terminology:

Gross Profit % (Bodyshop)

Gross Profit ÷ Turnover (x100)

Baseline: >45%

Description:

Within the Bodyshop there are two levels of Gross Profit that are measured; be sure that you are measuring the results that you really want.

The basic concept of Gross Profit is simply sale less cost of sale, therefore the following example relates to the Bodyshop as a whole.

The trading strategy of your Bodyshop will have an impact upon the suggested baseline of 45% and will vary according to the level of insurance work that your business undertakes.

Example:

A) Total Gross Profit = R107,540
B) Turnover = R165,446
C) Gross Profit % = 65% (A ÷ B X 100)

Discussion:

Financial reports for the Bodyshop show Gross Profit on Labour Sales before they show the total Departmental Gross Profit; this page is explaining the overall Departmental Gross Profit within which Labour Gross profit is included.

The Gross Profit% of a Bodyshop has a tendency to be lower than that of the Service Department because of lower Recovery Rates and higher Productive Labour costs.

Related Terminology:

Hours Attended (Bodyshop)

Total Number of Productive Hours Available

Guideline: See Hours Bought

Description:

This term represents the total number of hours that the Productive staff are available to work, or in other words, the total number of hours that the Productives are clocked-in at the dealership.

The number of Hours Attended is the statistic that is used in the calculation of Utilisation and Overall Efficiency.

It is important to note that this does not give you the total number of Hours Worked; it provides you with the total number of hours that are available to work.

As well as collating the total number of Hours Attended, it is also recommended that you calculate the hours attended for each individual Productive so that their own individual Utilisation can be ascertained.

Example:

Discussion:

Factors that will influence the number of Hours Attended is time spent on training courses, time off on holiday, and sickness.

Related Terminology:

(Also see Hours Bought)

Hours Bought (Bodyshop)

Total Number of Hours Paid to Productive Personnel

Guideline: See Hours Attended

Description:

This term represents the total number of hours that you pay your Productives, or in other words it represents the total Productives salary for the specified period.

It includes time spent at the dealership, time spent on training courses, sickness and holiday pay.

For statistical purposes, and the calculation of key performance indicators, Hours Bought is never considered in any equation. For the most part, it is usually seen in business plans and annual budgets so that an accurate forecast of cost can be attained.

For instance, there are fifty-two weeks in the year of which four weeks could be allocated to holiday, two weeks allocated to training, and one week could be allocated for sickness.

Example:

A) Training = 80 hours (2 weeks)
B) Holiday = 160 hours (4 weeks)
C) Sickness = 40 hours (1 week)
D) Attended Hours = 1800 (45 weeks)
E) Total Hours Bought = 2080 (52 weeks)

Discussion:

Simply by multiplying the hourly rate that you pay to your Productives you are able to calculate a reasonably accurate forecast in each sector listed.

Related Terminology:

Hours per Vehicle Parc

Annualised Hours Sold ÷ Number of Vehicles in Parc

Guideline: Own Strategy

Description:

This KPI is very useful for assessing your current performance in Hours Sold against your fellow dealers or your total market penetration.

Keep in mind that this statistic is utilising every vehicle in the parc and if you are assessing a 10-year parc some of those vehicles may no longer be in your area or even in existence.

You may also wish to consider who else is registering vehicles within your territory it could be that you have a sizable fleet that is distorting your vehicle parc. You also have to ask yourself the question about the age profile of the vehicles that your dealership attracts.

Example:

A) Annual hours sold = 22,752
B) Number of vehicles in parc = 7,584
C) Hours sold per parc vehicle = 3 (A ÷ B)

Discussion:

Many financial reports also show you an average repair figure per vehicle in your parc, which uses an incident rate of around 20% and splits the hours between insurance and non-insurance work. This will provide you with a more realistic and accurate figure with which to obtain your territory potential.

Related Terminology:

Hours Sold (Bodyshop)

Total Number of Hours Invoiced

Guideline: See Labour Sales Mix

Description:

This figure represents the total number of hours that have been invoiced. Of course, the monetary value of this statistic is represented by the Labour Sales value.

It is more important to keep track of the number of Hours Sold than it is to keep track of their monetary value. This is because the monetary value of the Hours Sold can be influenced by your charge out rate and Recovery Rate and this does not therefore provide you with an accurate reflection of the direction of your business.

Example:

Discussion:

By far the easiest way to track the performance of the Hours Sold is to compile them into a simple graph on a weekly or monthly basis.

The graph will of course be more meaningful if you are able to segregate the hours sold between Retail, Internal and Warranty so that you can accurately plot the trend in each performance sector.

Related Terminology:

Hours Sold per Repair

Insurance Hours Sold ÷ Number of Insurance Repairs

Baseline: 18 Hours

Description:

This KPI generally deals with work carried out for insurance companies, as they tend to be the larger accident repair jobs.

The equation simply divides the number of Hours Sold by the number of repairs to provide you with an average number of hours sold per repair.

Example:

A) Insurance Hours Sold = 968
B) Number of Insurance Repairs = 51
C) Hours Sold per Repair = 19 (A ÷ B)

Discussion:

The resulting KPI gives you an indication of the type of work that you are receiving from your insurance companies and is also a measurement of the skills of your Estimator.

If you reported figures are below the suggested baseline of 18 hours it could be that you are receiving more of the smaller type of repairs or it could be that the Estimator is falling short of requirements.

Related Terminology:

Hours Worked (Bodyshop)

Hours Attended x Idle Time

Guideline: See Utilisation

Description:

This statistic represents the number of hours that the Productives have been working productively.

Working productively means, panel beating, spraying or trimming or in other words, working on time that can be charged out to the customer.

Although a Productive may be clocked in and available to work for 40 hours per week, the time that they spent working productively is shown as the Hours Worked.

There is only one way to accurately capture the number of Hours Worked productively and that is for each Productive to clock on and off each individual job.

Example:

A) Hours Attended = 40
B) Idle Time = 2
C) Hours Worked = 38 (A - B)

Discussion:

Whatever your thoughts in this area of analysis there is one question that must be asked. If you do not accurately record this key performance area, when you do have a problem that you want to resolve, where do you begin to look for the answers? There is an old quote that says: "If you can't measure it, you can't manage it."

Related Terminology:

Idle Time (Bodyshop)

Hours Attended x Hours Worked

Guideline: See Utilisation

Description:

Idle Time does not mean that the Productives are standing around idle; it simply represents the time spent at the dealership that cannot be charged out to the customer.

Typically this could be time spent locating keys or vehicles, waiting for parts and other such issues.

The mathematical formula is simply Hours Attended minus Hours Worked and this is always shown as a monetary value, which can usually be found within the Variable Expenses of the Bodyshop.

Example:

A) Hours Attended = 320
B) Hours Worked = 304
C) Hours Idle = 16 (A - B)
D) Prime labour Cost = R10
E) Idle Time = R160 (C X D)

Discussion:

In addition to this, some financial reports might show the monetary value of Idle Time as a percentage of the Departmental Gross Profit.

Related Terminology:

Labour Cost of Sales (Bodyshop)

Value of Hours Attended X Idle Time

Baseline: 90% of Attended Hours

Description:

This statistic captures the amount of money that is paid to Productives for every hour that is worked productively.

The amount of money that you pay your Productives per hour is divided into three sections: Hours Attended, Hours Worked Productively and Idle Time.

Hours attended simply represents the number of hours that the Productives have been clocked in and available to work, these hours are simply divided between Hours Worked Productively and Idle Time.

Example:

A) Value of Hours Attended = R6,290
B) Idle Time = R320
C) Labour Cost of Sales = R5,970 (A - B)

Discussion:

This example demonstrates that the cost of labour for the hours that have been sold can only be the hours spent working productively, and therefore Idle Time (or Diverted Time) is shown as a Variable Expense.

Related Terminology:

Labour Efficiency % (Bodyshop)

Hours Worked ÷ Hours Attended (x100)

Benchmark: 85% to 95%

Description:

This statistic tells you how much of the Technicians Attended time is actually spent working productively.

In more simplistic terms, each Productive usually clocks in and is available for eight hours each day, but how much of that time is spent spray-gun-in-hand or panel beating or in other words, working on hours that can be charged out to the customer? Labour Efficiency gives you the answer to this question.

Example:

A) Hours Worked = 957
B) Hours Attended = 1,040
C) Labour Efficiency = 92% (A ÷ B X 100)

Discussion:

This example shows that the Productives have attended 1,040 hours at the dealership of which 92% of that time has been spent working productively. The remaining 8% will be shown in your expenses as Idle Time.

Related Terminology:

Labour Gross Profit (Bodyshop)

Labour Sales x Labour Cost of Sales

Guideline: See Labour Gross Profit %

Description:

This is probably one of the most misunderstood calculations of all and is therefore worthy of your full consideration.

Most people are of the assumption that the Labour Gross Profit is Labour Sales minus Hours Attended. If this were to be the case then Idle Time would be reported at zero.

The true calculation is the monetary value of the Hours Sold minus the monetary value of the Hours Worked productively.

Example:

A) Labour Sales (hours sold) = R42,240
B) Hours Worked Productively = R7,803
C) Labour Gross Profit = R34,437 (A - B)

Discussion:

It is important to note here that the Labour Cost of Sales is only the value of the hours spent working productively on the hours that have been sold. You can deduce from this calculation that the Productives time is split between hours worked productively and Idle Time.

Related Terminology:

Labour Gross Profit % (Bodyshop)

Labour Gross Profit ÷ Labour Sales (x100)

Baseline: > 65%

Description:

Before you read this page, please read Labour Gross Profit to ensure that you have the true understanding of the performance area that your are measuring.

All profit-related KPI are usually measured against turnover, and in this instance the starting figure for your profit retention in the Service Department is 65%.

Example:

A) Labour Gross Profit = R182,241
B) Labour Sales = R253,112
C) Labour Gross Profit = 72% (A ÷ B X 100)

Discussion:

It is important to maintain a high profit margin in this KPI because the Departmental Expenses erode much of it away. Therefore if your performance in this area is below 65%, you will struggle to achieve a reasonable level of profitability when you reach the Direct Profit of your department.

This statistic has a tendency to be lower than that of the Service Department due to lower Recovery Rates and higher Productive costs.

Related Terminology:

Labour Sales Mix (Bodyshop)

(Sector) Hours Sold ÷ Total Hours Sold (x100)

Guideline: See Hours Sold

Description:

This information simply informs you of the sectors into which you are selling hours.

In the case of the franchised dealer, the Labour Sales Mix for the Bodyshop splits into three distinct categories of income sectors, which are Retail, Internal, and Warranty.

In the case of a stand-alone independent Bodyshop, the Labour Sales Mix may be split between, Retail, Insurance, Franchised Dealers and Fleet.

Whatever your circumstances, you may see your Labour Sales Mix being displayed as a Pie Chart to give an instant picture of your status.

However, It is always wise to measure your Labour Sales Mix in terms Hours Sold as opposed to the monetary value of Labour Sales because Recovery Rates vary across each income sector as do the charge out rates.

Example:

Discussion:

Price differences lead to inconsistency when measuring the trend and direction of your Bodyshop and it is therefore more meaningful to measure the Hours Sold into each income sector.

All of the price differences and distortions are eradicated when the number of Hours Sold are analysed as opposed to their monetary values.

Related Terminology: