Why is a busy shop still short on cash?
In auto repair the money moves out before it moves in. You order parts, pay your techs, and carry the cost of the work in progress, all before the customer settles up. A full schedule can actually widen that gap instead of closing it.
Where do the cash leaks come from?
These are the pressure points that drain repair shops specifically.
- Parts bought up front, sometimes on accounts that come due fast
- Payroll for techs that goes out every week no matter what
- Fleet and commercial accounts that pay on their schedule, not yours
- Comebacks and warranty work you eat the cost on
- Effective labor rate lower than your posted rate because of discounts and unbilled time
Is your labor rate actually covering you?
Your posted labor rate and your effective labor rate are often two different numbers. Discounts, courtesy work, and hours that never make it onto the ticket pull the real number down. If you do not know your effective rate, you cannot know if it covers your costs.
How do you tighten it up?
Track your real margin on parts and labor, bill the moment work is done, and put commercial accounts on clear terms. Watch cash weekly, not just at tax time. Small changes in how fast you collect can change the whole month.