A key aspect of managing any business is keeping accurate financial records. One of the most important tools you can use to ensure your financial data is well-structured and organized is a Chart of Accounts. When implemented correctly, a Chart of Accounts can significantly reduce the risk of transaction classification errors, which can be detrimental to your financial reporting. This makes it easier to track income, expenses, and assets. In this blog post, we’re breaking down what a Chart of Accounts is, why it’s important, and providing a few practical tips on how to set up a Chart of Accounts in your business. 

What Is a Chart of Accounts?

Before we get into the nitty gritty of setting up a Chart of Accounts, it’s important that you understand what it is and what purpose it serves in your business’s financials. A Chart of Accounts is a comprehensive index of all the financial accounts used by a business to classify financial transactions. These accounts are categorized into different groups and subgroups, which makes recording, tracking, and reporting on financial activities much easier. 

WHAT IS THE PURPOSE OF A CHART OF ACCOUNTS?

A Chart of Accounts serves many purposes, including organizing finances into different categories to allow interested parties to get a clear view and understanding of a business’s financial health. 

It also allows stakeholders to quickly locate specific accounts in order to see which transactions are occurring in each account from the general ledger. 

A well-organized Chart of Accounts is also helpful for comparing financial data from year-to-year. 

How to Set Up a Chart of Accounts

When setting up a Chart of Accounts, there are a few things to keep in mind that will help you reduce transaction classification errors. A common mistake businesses make when setting up a Chart of Accounts is having too many categories and overcomplicating the entire system. 

CHOOSE SIMPLE CATEGORIES

We recommend that you choose simple categories that are easy to remember, such as labor income, parts income, truck fuel, insurance, etc. The more simplified and easy it is to remember these categories, the less likely it is that you or your team will make transaction misclassification errors. Plus, this also helps streamline your bookkeeping process. 

UTILIZE CHART OF ACCOUNTS TEMPLATES

Most accounting softwares come equipped with sample Chart of Accounts templates that you can use and customize to meet your specific needs depending on your industry. This gives you a solid starting point to build upon. By utilizing these templates, you can ensure the most key categories and data points are included, which will also help reduce the risk of misclassification errors or missing data altogether. 

Just  make sure that you review the template and tailor it to match your business’s specific needs. Remove any accounts that don’t apply to your business and add accounts that are unique to your industry or company. 

AUTO INDUSTRY CHART OF ACCOUNTS 

If you are operating in the auto industry, you’ll need a specialized Chart of Accounts designed to meet the unique accounting needs of your automotive business. 

This automotive-specific Chart of Accounts can help you save time, effort, and frustration, as it is tailored to the unique categories, transactions, and financial data you deal with on a daily basis. 

If you’re looking to improve your financial data and reporting processes, implementing a well-structured Chart of Accounts is one of the first steps we recommend that you take. It will help you streamline your accounting and bookkeeping processes and gain better control over your financial data. 

Follow the steps in this blog post to set your Chart of Accounts up in a way that minimizes transaction misclassification mistakes and streamlines your financial reporting.

Ted Turner said it best, “Early to bed, early to rise, work like hell, and advertise”. As summer gives way to fall, marketing becomes more important. Many shops slow down on their marketing as business slows down. This is exactly the time to invest in continued marketing. It’s an opportunity to market while your competition is not. Many shops do reactionary marketing because they don’t have a formal plan. This type of hit and miss approach can be a waste of precious marketing efforts and dollars.

Developing a personalized marketing plan will be well worth your time and effort. About 80 % of auto retail dollars are spent at 20 % of the available shops. The reason is these shops understand exactly who their clients are and they market to those clients with a very organized and focused approach.

The first step to a great marketing plan is to know your target market. You can begin by using your operating system to run reports that reveal your client base. Look at things like who has spent more than $500.00 with you in the last year. What kind of vehicle do they drive? Where do they live? What is their zip code? If you are active in your shop you can probably think of ten to twenty great clients off the top of your head. Have your service advisors put together a list of their favorite clients too. Assemble all the information into a master list. Look at this list and determine what these clients have in common. What type of vehicles do they drive? Why do they use your shop? Use the information to develop a survey that asks the questions you want answers to. Begin targeting your specific clients.

Here is an example of a survey to get you started, but it’s important to tailor it to your shop:

Dear Valued Customer,

Here at “your shop’s name”, we are constantly striving to provide the very best customer service. If you could take a moment and share your input, we would greatly appreciate it.

What is the most important thing you consider when deciding where you will get your vehicle repaired?

• Price
  
• Warranty
  
• Professional, friendly staff
  
• Other ____________________________________________
  

What radio station, tv channel, and social media do you prefer?

• TV channel ___________
  
• Radio Station _________
  
• Social Media __________ (examples, Facebook, Twitter, Google +)
  

Have you or would you be comfortable referring family or friends to our shop and why?

Name the top 3 most important things you expect from a repair facility?

If you would like, we can add your name to our in-house mailing list. From time to time, we have specials for our customers only. This information is for our use only.

• Name and address _________________________________________
  
• Email address _____________________________________________
  

What could we do to improve our business and make your experience better?

Thank you for taking some of your valuable personal time in order to help us understand your needs better. If you have any other input, or if I can be of any assistance to you, please don’t hesitate to ask.

Sincerely,

“Your Name”

“Your Shop’s Name”

You and your staff should only give the survey to good clients. You do not need any input from undesirable folks. My next article will cover how to use this information to develop an action plan and ACCELERATE YOUR SUCCESS !!!

Picture This

(A lesson learned while teaching)

Years ago my younger brother came to work for me. He didn't know a thing about cars, but was willing to learn all he could. Teaching new techs is an art that most shop owners have to learn to do, but teaching your little brother can be a chore and can test your patience. I muddled thru it all and taught him what I could. I was sure at some point in time the two of us would butt heads like brothers will do, and he would take his new found skills and move up in the rank and files of the automotive technical world, but in the meantime it was his turn to learn from his older brother.

When he first started I would walk him thru each step of how to diagnose a certain system in a car. A lot of times he would have questions, and I'd do my best to answer them. He learned quickly and was really sharp at picking up some of those little details that are harder to teach, because you tend to forget to mention them while you're teaching. Mainly because you are trying to get to the solution as efficiently as possible, and you neglect to bring it up. Such as: "always test your test light connection before testing what you're testing, or don't forget to check for all your tools before you pull the car out of the shop…." Things like that.

One day we had a truck come in with dual fuel tanks on it. The gas gauge wasn't working and needed some attention. This was a perfect opportunity for Junior to learn a few of my short cuts on these old models. It was an older Ford, in which the tank gauge ran thru the tank switchover button. It was rather easy to pull it out of the dash and connect to the gauge from the back of the switch.

Luckily it was the typical problem I've seen a hundred times in the past. The switch connections would melt and the tank wouldn't switch from the front tank to the rear, and of course the gauge wouldn't move either.

After locating the correct leads to the gauge and to the tanks I decided to show him how the gauge worked. I hooked up the one of the tanks to the crossover lead that would supply the signal from the tank to the gauge.

"Ya see this, that's the lead to the fuel gauge in the dash, and this is one of the tank wires. I'll connect these together and we should get a reading on the dash," I told him.

He was watching intently, taking in all the wiring diagram information, the location of the wires, and how I was bypassing the switch. He was fascinated with the flow of the current and the way the gauge would respond. I even went as far as moving the gauge from full to empty by opening and closing it to a ground signal. While I had his attention I filled him in on the two types of gauges that were used back then (bimetallic and magnetic) and how low resistance on a bimetal type gauge would read near a full tank, while a magnetic gauge would read close to empty. Change the resistance and the gauge would/should read accordingly.

"So, if we put gas in the tank the gauge should move right? That way we could check the sending units in the tanks too," he asked me.

"Great idea, grab a gas can and let's add a few gallons," I said, excited that he was so interested in the project.

He grabbed a can of gas and poured a few gallons in the tank. I was watching the gas guage carefully, but there was no movement. I knew I was on the right wires, but nothing was happening. Now what? Are there more problems?

"Crawl under there, and check to be sure the wire color is correct," I yelled from the cab to him.

"Yep, it's the right wire on the tank."

"Well, we might have to pull the tank; it's not changing the gauge readings up here."

"Before we do that let's add some more gas, maybe we didn't add enough," Junior tells me.

I thought I better go back and help hold the funnel, while he poured the gas in the tank. Unknowing to me, all this time my wife (who was the office manager) was listening in on the whole thing. She likes to keep tabs on me, and make sure I'm not going into one of my usual rants or having a fit because I had to explain something over and over again to little brother. This time she was standing at the corner of the shop just behind the truck with a camera. "CLICK", I heard the camera shutter go off and she was back there laughing like there was no tomorrow.

"What's so funny?" I asked her.

"You two idiots have been putting gas in the wrong tank. You're on the front tank, and you're putting gas in the rear tank," my wife answers, laughing hysterically.

About then the camera "clicked" again… this time it was an action shot taken at precisely the exact moment when these two idiots had that dumb struck look on their faces and realized what they just did. The shot had both of us on our knees, one holding a funnel and the other with the half empty gas can, and both of us staring right into the camera lens. Couldn't have set it up any better if you tried. The picture clearly showed the side of the truck with both fuel tank doors visible and there was no doubt which tank we were putting in the extra gas. I guess it was one of those things I should have mentioned when we were checking the tank senders… make sure we are both on the same tank.

For years that picture hung over her desk, and anytime I thought I was so smart she would point at the photo. Usually with that typical smirk, usually shaking her finger at me and of course the laugh… she had to laugh, but it wasn't all that funny until she had me laughing about it too. Ok, Ok, I'm not perfect... and now my little brother knows it too. These days he's a top notch tech at a dealership, and I have to call him on occasions for some help on how to solve things once in a while. Oh the photo… uhmmm… what photo?? Somehow it's missing… haven't seen the darn thing in years. But I guess I really don't need to see the photo … the wife has a pretty good memory... she reminds me just how smart I think I am every chance she gets.

Keep those comments coming, always enjoy hearing from everyone. It makes my day to know I've put a smile on your face. Thanks for reading. Gonzo