By: Heidi Harris, Solutions Engineer Director

Working in a collision repair facility, you know that cash flow is the lifeblood of your business. It's what allows you to pay your bills, invest in new equipment and training, and ultimately keep growing your operation. It’s no secret that managing cash flow can be a challenge, especially in an industry with fluctuating customer demand and long repair cycle times.

In 2024, the industry is still facing a scheduling backlog of 2.7 weeks and average cycle times of 12-13 days. How does this impact cash flow, you ask? Well, while a backlog feels "safe," it also gives consumers more time to change their minds. They might decide not to repair at all, or worse, take their business to another shop – both scenarios poke holes in your projected income. And if you're pre-ordering parts? Oof, that hole could get even bigger! Add to that steadily climbing cycle times and record-high repair costs, and you're carrying more costs for longer, making cash flow management that much more important.

So, while it can be a challenge, it doesn't have to be complicated. Today, we'll review a few topics to consider around cash flow that can easily fit into your busy day-to-day operation.

Accounts Receivable: Get That Money

One of the biggest challenges to managing cash flow is collecting payments in a timely manner. Uncollected receivables can quickly turn into bad debt, eroding profits and impacting a shop's financial stability. Tightening up a few processes and ensuring you have the right offerings can make all the difference here.

• Final bill and send invoices promptly. Don't wait to final bill your insurance carriers or send invoices to customers. The sooner you send an invoice, the sooner you'll get paid. Put checks in place pre and post vehicle delivery to ensure invoicing is correct, the right amounts are collected at pick up, and every requirement is properly met immediately following vehicle delivery. Think of it like this: the faster the invoice goes out, the faster you can turn that "money owed" into "money for that sweet new measuring system."
• Offer multiple payment options. Make it easy for customers to pay you by offering a variety of payment options. Offer onsite and digital payment options to meet your customers' needs. Offer a way for customers to see their estimate and invoice totals in real-time throughout the repair. This will help alleviate last-minute questions or concerns about what is owed.
• Follow up on outstanding invoices. While this process can be cumbersome because of billing requirements and payment portals, don't delay payment follow-ups on aging AR. Your management system should show you if anything was missed. It’s often something very simple that needs to be handled for payment to be triggered.

Consumer Payment Options and Surcharging: It's Not Just a Fancy Word

Surcharging for credit card payments in the collision repair industry is becoming increasingly common, and for good reason.

• Direct Recovery: Credit card processing fees can eat into a shop's profit margins, especially on large transactions common in collision repair. These fees typically range from 1.5% to 3.5% per transaction. Surcharging allows shops to pass these fees directly to the customer who chooses to pay with a credit card. This ensures the shop receives the full amount for services rendered.
• Boost Margins: By offsetting processing fees, surcharging directly contributes to a healthier bottom line. This extra revenue can be reinvested in the business for equipment upgrades, employee training, or marketing efforts. (Or maybe some tools and TVs to give away at the holiday party... because who doesn't love a holiday party raffle?)
• Customer Choice: Surcharging provides transparency and gives customers a choice. They can pay with a credit card for convenience and potentially earn rewards, or they can opt for a less expensive payment method like debit to avoid the surcharge.

Spend Controls and Payment Visibility: Keep an Eye on the Money

Ensuring you have a few controls in place with some transparency sprinkled in will help you optimize your working capital and increase your efficiency. No one wants to waste time or money chasing Bobby for that Wingstop receipt and hear him swear he didn't realize he used the shop card instead of his own.

• Reduce Unnecessary Costs: Implementing spend controls allows shops to set limits and approval processes for purchases, preventing overspending on materials, supplies, and services. This ensures that every dollar spent is aligned with business needs and budget constraints.
• Prevent Fraud and Misuse: Spend controls, such as requiring multiple approvals for large purchases or restricting the use of company cards to specific categories, help prevent fraudulent activities and unauthorized spending.
• Enhance Financial Control: Real-time visibility and control over spending and payments provide a comprehensive understanding of the shop's financial health, enabling proactive management and informed decision-making.

In Conclusion: Cash is King (and Queen!)

Managing cash flow is like playing a game of Tetris – you need to strategically fit all the pieces together to avoid a messy pileup. By implementing these tips, you can improve your cash flow, avoid financial crunches, and keep your business running smoothly. Need some help? Our ELEVATE advisors are here to help.