Profit precentage

[Miked1]

How can I have a true profit percentage using the actual hours time verses using the pay time. If a tech takes longer than the job is sold for the profit should be based on his actual time and not the pay time. Our techs are paid by the hour. An example would be if a job is sold for 1.5 hrs and the tech takes 3.1 and his pay rate is $22 pr hour the percentage should be based on the actual and not the pay. Thoughts or suggestions to having a corrected profit percentage?

[ricmorin]

Labor profit will always be based off of pay hours. How you pay your technicians dictates how you enter the data into the window. Let's look at the differences. There are 3 labor entries. Charged hours, Pay Hours and Actual Hours. Charged hours in these examples remain constant.

For the flat rate tech, pay hours would generally equal charged hours. Actual hours would be the real time they worked.

For the hourly tech, pay hours and actual hours should be the same.

Applied this way, you'll always have the true cost of labor applied to your profit analysis.

[Miked1]

Thank you for your input.

In our case the pay hours and the actual hours cannot be the same because that is the way we measure the true efficiency of our technicians. The example I posted gives the tech a low efficiency rating but does not address the true profit on the job. The shop charged the customer 1 hour at $100 per hour and the tech took 3.1 hours at $25. Mitchell lists the labor profit at 75% gross margin but the reality is the true cost of labor is $77.50 for a profit margin 23%.

Why could the program not measure the true margins and profit as well?

[Silky7]

The system will calculate exactly as you suggest, provided you input the data. For this example, I used the $25 hourly rate as you suggested, but rounded the 3.1 to 3 even for simplicity. (Ignore the miscellaneous overhead)

profitexample.PNG (40.98 KiB) Viewed 20198 times

And the reporting still shows the hits to productivity and efficiency the shop took:

efficiency.PNG (15.11 KiB) Viewed 20198 times

Hopefully this helps?

[Miked1]

Again thank you. But as your example shows the tech efficiency is at 100%. We always have the charge hours & tech pay equal so what we bill the customer is what the tech gets credited for. The efficiency percentage is also a number that we use for our techs annual review.

Which leads me back to the original question of having a true labor margin on the repair order. Since our techs are hourly the ticket can never show a true profit margin on labor with having the correct efficiency. If I am not understanding this correctly I can be contacted at 856-234-1868.

Thank you again for your time and consideration.

Mike

[ricmorin]

In our case the pay hours and the actual hours cannot be the same because that is the way we measure the true efficiency of our technicians

Please explain. If you are paying by the hour, you need to enter the figures as I described above. It's the only way to report true labor costs when paying by the hour. The report and columns work best for FLAT RATE pay. IGNORE tech efficiency column when paying by the hour. USE productivity column to measure your techs when paying by the hour.

[Miked1]

Ric, after the holiday would there be a good time to call and discuss versus the forum? Please advise.

Thank you,

Mike

[ricmorin]

Mike,

You can call me anytime, M-F, 8 to 5 Eastern time. Just state that you are from the forum. The office does a good job at screening calls. If you dial my extension directly, it will likely go to VM but I will return the call ASAP.