March 6, 2014

Why Does The Collision Industry Still Use Dollars Time Hours To Calculate P&M Cost?

If virtually everyone in the collision repair industry agrees that the prevailing method for paying for paint and materials (P&M’s), based on a fixed dollar amount times the refinish hours, is not “fair” to at least one of the two parties involved; why does this practice continue?

We’ll look at the three most frequently mentioned reasons why the industry has not already moved to a more equitable payment system, such as INVOICING; and examine why these constraints are no longer valid.
1. It’s not easy for shops to document what P&M’s were actually used for a specific vehicle repair.  This is the first reason usually given.  That premise may have been valid many years ago, but is not true today.
 Almost all shops today mix their paint and other liquids on a paint system smart-scale.  These systems provide a cost and sell report for each mix, based on the unique vehicle color.  With this information a shop is already half way home towards creating a very accurate final invoice for their P&M’s.
Gathering accurate information on the materials used, however, takes a little more effort; but this too can be done quickly and easily.  There are several P&M estimating systems on the market today that provide a shop with a list of materials (sometimes called ‘dry goods’) that are predicted to be used for a specific job.
If the shop will print out that ‘materials check list’ and place it in the travel jacket that goes along with the vehicle throughout the repair process, when the repair is completed the tech who worked on that vehicle can take a couple of minutes to look over that list of line items for accuracy and note any necessary adjustments that need to be made.  Next, make any necessary changes (adds, edits, and deletes) on the P&M invoicing program and generate an accurate ‘final list’, or invoice, of all of the paint and materials used on a specific vehicle repair.  Then, present it to the vehicle owner (customer) and their insurer for payment.
2. The feeling that no matter what the shops do, the insurance companies will not change the way they pay for P&M’s.  This assumption is also false.  Henry Ford once said, “The man who thinks he can, and the man who thinks he can't; are both usually right.” Which one are you?
Today, thousands of shops are regularly being paid off of paint and material INVOICES because they have taken the ‘high road’ and have done ‘the right thing’ for ‘the right reason’ and they are doing it ‘the ‘right way’.
Changing the way one has done business over many years is not an instant occurrence; it is a journey.  It takes patience and persistence to effectuate change.  In addition, it takes three key components to be successful; (1) willing people, (2) a plan of action and (3) the right tools.
Willing people are those who have a positive attitude, believe there is a need for change, and are disciplined enough to stay the course.  A plan of action outlines how one will get from where they are to where they what to go.  And, the proper tools should help make the task as easy as possible
3. People and companies have a built-in adversity to change.   This is true, but it does not make it right.  Everything is constantly changing; and those people or businesses that do not embrace change will not be around in the future.
 “Repairers must first change the way they do business, if they expect to change the way insurers do business with them.”  This truism covers all aspects of the collision repair industry and the repairer/insurer business relationship.  It is clearly applicable when it comes to changing the way repairer’s currently get paid for paint and materials (P&M’s).
Getting paid equitably for paint and materials is a four step process.

     First, shops need to know their true cost of P&M’s based on an accurate accounting of what was used to repair each and every vehicle that goes through their shop.
     Second, with correct information at their disposal, they can more accurately establish the selling price needed on each job to generate the expected gross profits they desire.
    Third, they need an easy way to document the items that are to be invoiced.
    Forth, they need to ask for the sale!

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