Reviewing Sales and Costs to Determine Mismatches

  1. In QB, run the P&L for the month.
  2. Double click on the sales total for the profit center you want to check the coding on. Adjust all column widths so that you can see the customer name and/or RO# as well as the total posted for that invoice. If possible sort by Customer name/RO#. Print this page.
  3. Go back to the P&L and double click on the cost total for the same profit center. Again adjust all columns so you can see the customer name/RO#, vendor name, invoice number and invoice amount. Then if possible, sort by customer name/RO#. Print this page.
  4. On the costs page, if there is a beginning WIP journal entry and an ending WIP journal entry, you will need to get the detail of each entry to see which costs for each RO are included in the entry. This should be on your WIP reports from the prior month end and from the current month-end.
  5. Beginning with the Sales page, for every RO listed, find the corresponding costs on the cost page. Consider the following:
  6. Keep in mind that costs may be included in the beginning of the month WIP entry (which is a reversal of the prior month’s entry). Use the prior month WIP report to identify RO costs.
  7. There may be credits which will reduce the total costs but should be included in the calculation.
  8. If there is a sale for this month, there should be a cost for this month.
  9. Once all of the costs are found look for the following:
  10. Is the sales amount greater than the cost amount? (It should be)
  11. If so is the gross profit on that RO for this profit center reasonable? Gross profit = (1-(Cost/Sales))
  12. Determine whether you need to go find other costs elsewhere (especially if you have no costs or a really high gross profit calculation that is not explained)
  13. Mark off both the sale and the costs once you have checked them so you know what is left to review
  14. If you don’t find any or enough costs to correspond to the sale:
  15. Look in other profit centers for the cost (go back to the management system to find the vendor, invoice number and $ amount and search in QB to see where it posted)
  16. Look in other months
  17. Solutions:
  18. Costs for things that your employees broke can be reclassified into an expense account (Shop Pay Expense, Warranty Expense, etc.) so that it doesn’t impact the gross profit calculation.
  19. Make a mental note for anything that it looks like you truly lost money on and discuss with the estimator as to why it happened and determine whether a supplement could be filed to recapture any lost money.
  20. Change the date of either the sale or the costs into the correct month (if the month hasn’t been closed and only if it makes sense).
  21. Generally you will not change amounts unless the amount does not agree with source documentation (a bill, etc).
  22. Price matched parts should ideally have both the sale and the cost posted to OEM/New Parts sales and costs.
  23. If there are costs remaining for other ROs that were not on the sales list, these are WIP amounts and should have been included in the month-end WIP entry. Review the month-end WIP report and confirm that these amounts were included in the WIP entry and reversed out of COGS in the month-end journal entry. Anything that didn’t get included in the journal entry should be investigated to determine why it wasn’t on the WIP report. (Did it not get posted in the management system, did it get included in a different profit center, did it have a different date/month?)
  24. Most common mismatch reasons:
  25. Tow bills not posted in the management system so they don’t get included in the WIP entry and reversed out of costs
  26. Remanufactured parts costs posted as aftermarket costs (especially if you are posting manual bills)
  27. Items from paint material bills being posted to paint materials/allied products costs that aren’t paint materials (should be shop expense or small tools or stock parts)
  28. Nothing gets coded as stock parts in the lines (so no stock parts sales) but the costs are posted manually to stock parts
  29. Price match parts costs post as OEM costs but the sale shows as Aftermarket, Reman, LKQ etc as the line does not get coded to OEM.
  30. Sublet costs get broken down into a separate sublet profit center (PDR, Mechanical, Glass, etc.) but the sale goes to a general sublet category (Sublet Other or Sublet)
  31. Materials post as stock parts costs but Materials sales.
  32. Sublet labor costs don’t have a sale because the hours didn’t get reclassified from labor hours to sublet dollars
  33. Towing sales posted as sublet sales
  34. Cost is dated in one period and the sale is dated in another period
  35. Costs posting to the cost accounts instead of WIP accounts for shops on inventory accounting
  36. No mechanical or frame labor costs because they aren’t being tracked in an hourly pay environment or because the flag reports are not being utilized correctly to record these costs.