Glossary
Auto repair shop bookkeeping glossary
Plain-language definitions of the shop and bookkeeping terms auto repair and collision shop owners look up most.
A
- Accounts payable (A/P)
- Money the shop owes vendors for parts, supplies and services it has already received but hasn’t paid for yet. It shows on the balance sheet as a liability.
- Accounts receivable (A/R)
- Money customers owe the shop for work already done, such as fleet accounts, warranty companies or insurance payments that haven’t come in yet. It shows on the balance sheet as an asset.
- Accrual basis
- A way of keeping the books where income is recorded when the work is done and expenses are recorded when they’re incurred, whether or not money has changed hands yet. Compare with cash basis.
- ARO (average repair order)
- The average dollar amount of a repair order over a period. It’s total sales divided by the number of repair orders for that period.
B
- Balance sheet
- A report that shows what the business owns (assets), what it owes (liabilities) and the owner’s equity on one date. The P&L covers a period of time, while the balance sheet is a snapshot of a single day.
- Billed hours (billable hours)
- The labor hours charged to customers on repair orders, often taken from a labor guide. They can differ from the hours a technician actually spent on the job.
- Break-even
- The amount of sales at which the shop covers all of its costs, with no profit and no loss. Our break-even calculator shows the idea with your own numbers.
C
- Car count
- The number of vehicles the shop works on in a period, usually counted per day, week or month.
- Cash basis
- A way of keeping the books where income is recorded when money comes in and expenses are recorded when money goes out. Compare with accrual basis.
- Cash flow
- The money moving into and out of the business over a period. Cash flow and profit aren’t the same thing: loan payments, parts bought for stock and customers who pay later all affect the bank balance differently than they affect the P&L.
- Chart of accounts
- The list of every account in the books, such as bank accounts, parts sales, labor sales, parts cost and payroll expenses. Every transaction is recorded to one or more of these accounts.
- Comeback
- A vehicle that returns for the same problem after a repair, often redone at no charge to the customer. It’s also called a redo.
- Core charge (core deposit)
- An extra amount a parts supplier charges on certain rebuilt or remanufactured parts, like alternators, starters and batteries. It’s credited back when the old part, the core, is returned.
- Cost of goods sold (COGS)
- The direct costs of the work the shop sells, such as parts, sublet work and, in many shops, technician labor. It sits between sales and gross profit on the P&L.
- Cycle time
- In a collision shop, the number of days a vehicle spends at the shop, often measured from when it arrives to when it’s delivered back to the customer. Shops and insurers measure it in slightly different ways.
D
- Door rate (posted labor rate)
- The hourly labor rate the shop posts or quotes to customers. Compare with effective labor rate.
- DRP (direct repair program)
- An agreement between a collision shop and an insurance company. The insurer refers its customers to the shop, and the shop agrees to the insurer’s terms on things like pricing, procedures and paperwork.
E
- EBITDA
- Earnings before interest, taxes, depreciation and amortization. It’s the shop’s profit before those four items are subtracted, which puts the focus on what the day-to-day operations earn. Compare with net profit, which comes after all of them.
- Effective labor rate (ELR)
- The average amount the shop actually brings in for each labor hour it bills. It’s labor sales divided by billed hours, and it can come out different from the door rate because of discounts, warranty work and other adjustments.
- Equity (owner’s equity)
- What’s left of the business’s assets after its liabilities are subtracted. It includes money the owner has put in and profits kept in the business, minus what the owner has taken out.
F
- Flagged hours
- The labor hours credited to a technician for the jobs they completed. Shops that pay flat rate often use flagged hours to figure technician pay.
- Flat rate
- A pay method where a technician is paid a set number of hours for each job, usually from a labor guide, no matter how long the job actually takes.
G
- Gross profit (gross margin)
- Sales minus cost of goods sold. It’s shown in dollars, or as a percent of sales, which is called gross margin. Shops often look at it separately for parts and for labor.
I
- Inventory turns
- How many times the shop sells through and replaces its parts inventory in a period. It’s parts cost for the period divided by the average value of parts on hand.
L
- Labor gross profit
- Labor sales minus the cost of the technician labor that produced them, shown in dollars or as a percent of labor sales.
- Liabilities
- What the business owes, such as loans, credit card balances, vendor bills, payroll taxes withheld from paychecks and sales tax collected but not yet paid to the state. They show on the balance sheet.
M
- Markup
- The amount added to a part’s cost to set its price, shown as a percent of the cost. A part that costs $50 and sells for $100 has a 100% markup. Compare with parts gross profit, which measures the same sale as a margin.
N
- Net profit (net income)
- What’s left after all costs and expenses, including overhead, are subtracted from sales. It’s the bottom line of the P&L.
O
- Overhead (operating expenses)
- The costs of running the shop that aren’t tied to one job, such as rent, utilities, insurance, software and office staff.
- Owner’s draw
- Money the owner takes out of the business for personal use. In the books it’s recorded in equity, not as an expense, so it doesn’t appear on the P&L.
P
- P&L (profit and loss statement)
- A report of sales, costs and expenses over a period, such as a month or a year, that ends in net profit or net loss. It’s also called an income statement.
- Parts gross profit (parts margin)
- Parts sales minus parts cost, usually shown as a percent of parts sales. The same $50 part sold for $100 has a 50% margin, even though its markup is 100%.
- Parts matrix
- A pricing table, usually set up in the shop management system, that sets the markup on a part based on what the part costs.
- Productivity (technician productivity)
- Commonly, the hours a technician actually spends working on vehicles divided by the hours they’re at the shop. Shops use productivity and efficiency in slightly different ways.
R
- Reconciliation
- Matching the balance of an account in the books to an outside record for the same period, such as a bank or credit card statement.
- Repair order (RO)
- The document for one vehicle visit that lists the parts, labor and other charges. Once it’s closed, it becomes the customer’s invoice.
S
- Severity
- In a collision shop, the average dollar amount of an estimate or repair order. It plays the same role as ARO in a mechanical shop.
- Shop management system (SMS)
- The software a shop runs on every day for estimates, repair orders, invoices and scheduling, such as Tekmetric, Shopmonkey, Mitchell 1, CCC ONE, Shop-Ware and NAPA TRACS. Many connect to QuickBooks Online through an integration, often called a sync, that sends sales and payments into the books.
- Shop supplies
- A charge on repair orders for small items used up on the job, like rags, cleaners and lubricants, that aren’t listed as separate parts.
- Sublet
- Work the shop sends out to another business, such as alignments, glass or machine work, and then bills to its own customer.
- Supplement
- In collision repair, an addition to the original insurance estimate for damage or repairs found after the vehicle is taken apart.
T
- Technician efficiency
- Commonly, the hours a technician flags or bills divided by the hours they actually spent on those jobs. Compare with productivity.
U
- Undeposited Funds
- An account in QuickBooks Online that holds customer payments that have been received but not yet recorded as part of a bank deposit.
These are general definitions for learning. Shops, software and industry groups define some of these numbers in slightly different ways. Nothing here is tax or financial advice.
Curious what these numbers look like in your own books? A free consult is a good place to start.
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