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Posted

Hello everyone,

I have a question regarding the categorization of software expenses on financial statements. Specifically, I'm wondering if I should list expenses for computer software like accounting or computer protection separately from the software I use to actually fix cars, such as updates to scan tools and management software.

How do you handle these types of software expenses in your financial statements?

Thanks in advance for your help!

 

Posted

I group anything having to do with computers to run our business into one category.  Another category is the same thing having to do with the shop computers to fix vehicles.

I used to break it all out and had a butt-load of different categories in my Chart of Accounts (COA) that after a few years grew and seemed to take on a life of its own.  After about 15 or 20 years, I had my COA list down to about 40 account categories.  It's really easy to break every little thing down to its own category.  I just got tired of all the account categories and the high likelihood of miscategorization it engendered.

To me, a COA list is your own preference.  Some people like to know every little thing, and some do not, like me.  The only way you can get into any real trouble is from MISCATORIZING an expense or a Cost Of Goods Sold account.

My acid test to answer the question of "Is it a COGS or is it an expense?" is this:  "If you didn't have a single customer and did no repairs for a month, would you still have that expenditure?"  You would have no parts, no labor, no towing, etc.  If the answer is "yes", it's an expense.  If the answer is "no" it's a COGS.

 

Posted

Well then, I'm not classifying the ACDelco and Motorcraft programming correctly. although I don't charge the customer for that just don't do enough to justify the yearly charges. 

Posted
12 minutes ago, Twilight said:

Well then, I'm not classifying the ACDelco and Motorcraft programming correctly. although I don't charge the customer for that just don't do enough to justify the yearly charges. 

Help me understand you better.  You're incurring an expense for programming, yet your shop receives no revenue for programming.  Is that correct?

Posted

No, I charge 2 hours to program. but on the odd brands (GM & Ford) for me, that I program and have to pay oem websites. I eat the fee. I do a lot of BMWs and programming is included in my tool's yearly subscription. 

Posted
41 minutes ago, Twilight said:

No, I charge 2 hours to program. but on the odd brands (GM & Ford) for me, that I program and have to pay oem websites. I eat the fee. I do a lot of BMWs and programming is included in my tool's yearly subscription. 

So, you specialize in BMW and/or European vehicles?  Eating the fee for U.S. brands is not a bookkeeping issue, it's a business issue.  To be clear, do you also not charge BMWs because it's "programming is included in my tool's yearly subscription.?"  Please clarify.

Posted

I charge 2 hours for programming, doesn't matter the make or model. The customer pays for time only. There is no line item on the customer's invoice for a subscription fee. Whether I pay for programming software by the hour, day, week, year, VIN, credits or tokens, it is my expense in my head.  Every time I pay for software, I have it as an expense. Software for antivirus, bookkeeping, scan tool updates, repair information, shop management, and programming are all listed as an expense and are all in the same expense category. As you are saying, some of that software is a cost of goods. Yet is it a cost of goods if the customer is not billed for it. And does it matter is not an income so it's an expense all cost of goods are an expense anyway as I have to pay for them. Expense cost money. Income brings in money

  • Like 1
Posted

Some accounting issues can differ, based on the owner/bookkeeper preferences.  This is such a case.  There is absolutely nothing wrong with doing it the way you are currently doing it.  If you choose to expense it all off, that's OK.  All that matters is that you're aware of it and know what's going on.

Some business owners want to know every little detail (sometimes called profit centers) about their business.  I used to be that way, but because of it, my Chart Of Accounts was a huge list.  I finally got tired of it and started consolidating some of the accounts.  Judging from what you wrote, I think you are good to go just as you are.  No changes needed.

Posted

The GM is a cost, you have to buy each vin per vehicle the subscription is an expense. The Ford is an expense as your only paying for the software yearly subscription

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  • Have you checked out Joe's Latest Blog?

         0 comments
      The Technician Shortage Is Our Fault, And It's Time We Own It
      Nearly every day, I hear shop owners complain: "There's a technician shortage. We can't find qualified people. There's no one out there." If that's true, then who's to blame?
      The industry? The schools? The government? I don't know how you feel, but who promised us an endless supply of qualified technicians?
      Another common complaint is that young people do not want to work in the trades. Well, if that were true, then why are other trades such as HVAC, electrical, and plumbing growing? What are they doing that the automotive industry is not? 
      Here's the reality we need to face: We do have a problem, but we shouldn't look for someone or any entity to rescue us. Not the government. Not the trade schools. Not the recruiting companies. No one owes us a workforce. If we want great people in our industry, it's up to us. At some point, we need to own up to the truth: Building a pipeline of qualified technicians is our responsibility.
      In this blog article, I will break down the key reasons we are in this situation today and what we, as an industry, can do to solve the technician shortage. Are you ready to look in the mirror?
      Have We Pushed Technicians Away?
      Let's take a look at flat-rate pay. True flat rate, which pays a technician only for the hours they produce, is a controversial pay plan that emphasizes high production levels and creates a competitive work environment that, if not properly controlled, can lead to increased mistakes and a decline in morale and team spirit. Additionally, the stress and physical demands placed on technicians as they age are not favorable to long-term employee retention. What do we do with technicians as they grow older into their fifties and begin to slow down? 
      I have heard all the arguments and pros and cons of flat-rate pay, and I am not going to judge any pay plan. Let the facts speak for themselves. True flat rate has changed in most areas around the country and has evolved into a pay plan that gives technicians some pay guarantee.
      Many shop owners have learned that team morale, along with the opportunity to earn income, is important to technicians and to the company's long-term success. But let me ask you: how many technicians have left or been pushed out over the years because of the old flat-rate pay system?
      Another issue is the workplace environment. I remember being grateful to be hired as a young technician at a local repair shop. While very thankful, the work environment was not ideal. The shop owner kept the bay doors open year-round (I am from New York) unless it rained or snowed. He felt that if the bay doors were closed, customers might think we were closed for business. We had no heat and no hot water. Many of the jobs were done outside, year-round,  in all types of weather. The starting pay was minimum wage, with no benefits, sick days, or vacation pay. 
      Now, again, I need to point out that I was truly grateful for the opportunity this shop owner gave me. I learned a lot working there, and the experience was pivotal in my career. But looking back, I wonder how many people were discouraged by these working conditions?
      While the physical demands of the repair workplace are daunting, perhaps even more critical is the culture. Too many of my generation shop owners preached the mindset of "my way or the highway." We were the business owners, after all. We started our companies, took all the risks, and provided jobs. Why shouldn't we be the ones to set the ground rules our way?   
      Many of us found over the years that the "my way or the highway" mentality was a sure way to isolate employees and make them more likely to look over the fence for greener grass. In other words, it led many technicians to seek employment elsewhere, where they felt they could be appreciated and recognized for their hard work. The issue, however, was that there wasn't much green grass around. Disappointment after disappointment, bouncing from repair to repair shop, eventually led to despair. So, I ask you: were workplace conditions a contributing factor in today's technician shortage?
      Another factor that we are all well aware of is the complexity of the modern automobile. When I started, the work was mostly physical, and you were required to master essentially three vehicle models: General Motors, Ford, and Chrysler. Let's fast-forward to today. The evolution of automotive technology, along with the extensive training and tools required, has outpaced the typical technician's pay compensation, with no clear career path. Again, leading to frustration and insecurity about the future.
      Here is the bottom line: people don't leave their job; they leave their experience. We must do a better job. 
      The News Isn't all Bad; Your Next Steps to Fix the Technician Shortage
      To fix the technician shortage, it will take a combined effort from everyone in the automotive industry, particularly automotive shop owners. Shop owners are in the perfect position to make the greatest impact, not only on their businesses but also on the future automotive workforce.
      First, shop owners must become better leaders and understand that their ultimate success is directly dependent on the people they assemble around them. Any shop owner who mistakenly believes they can build an empire solely on their abilities is destined for serious disappointment. Business owners who think like this will eventually plateau. Without the collective contributions from a team of qualified people, your business will stall; it will not continue to grow.
      Create a workplace that attracts top talent: a clean, professional, well-equipped facility designed to support productivity, teamwork, and a career, not just a job. Build a great reputation in your community by getting involved locally. Become the auto repair shop that people take notice of as "the" place to work.
      Next, shop owners must become more financially knowledgeable. Knowing your numbers and what you need to achieve for a strong bottom-line profit is essential to paying technicians the money they need and deserve. Profit will also allow you to compete with other trade industries by providing a benefits package that has real take-home value and security.
      When it comes to culture, this is where the rubber hits the road. People crave recognition, praise, and a sense of purpose. Despite what you hear, people are not just money-motivated. Once people feel secure in their financial situation, retaining and motivating technicians can only be achieved by connecting with them on an emotional level. You cannot show enough appreciation. Give out praise for a job well done as if your business depended on it, because it does.
      As technicians age, we need to have a place for them. Expecting a 58-year-old to perform like a 35-year-old is unrealistic. We need to be more focused on career pathing. Provide training, skill development, and coaching to develop leaders and mentors within our older workforce. While their bodies may have slowed, the knowledge they have gained is priceless. 
      Our future is dependent on young people entering our industry. We need to give more young people opportunities. Every shop owner across the country should consider hiring an apprentice, then build an apprentice training plan and career path for them. If every shop did this, we could solve the technician shortage within five years. Get involved with the trade schools and high schools in your area. Look into the NAPA Apprenticeship Program. Don't sit on your hands with this one. Do it today.
      Lastly, don't get left behind. Commit to ongoing training for all your employees. Keep up to date with tools and equipment tailored to your business model. Don't try to be all things to all people and all vehicles. Identify your core profile customer and the vehicles they drive, and become an expert on those vehicles and the services you offer.
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