What Every Shop Owner Needs to Know About Accountants
In order to build a successful auto repair shop, there are a number of things you will have to do. You will need to have clearly defined goals, a plan, and you will need to surround yourself with successful people. You will need gifted techs and advisors, a great support staff, the help of marketing professionals and business coaches, and a great accountant as well. Unfortunately, most shop owners don’t understand how to find the really great accountants, they don’t know what to expect from them, and they don’t know how to utilize their services. With our changing economy, and the ever-increasing tax burdens we face in business, now more than ever before, you need to be working with a great accountant. What I would like to do with this article is help take the mystery out of the relationship most shop owners have with their accountants to help you build a more profitable business.
Putting first things first, the overwhelming majority of shop owners make two mistakes with their accountants: they use them as overpaid bookkeepers, and they feel their accountant should be giving them business advice. Unfortunately, that’s the furthest from the truth. Unless your accountant knows the key performance indicators that are hit by the top shops in America, what the loaded cost of labor should be for a profitable shop, and what the top shops generate in part profit as a percentage of sales, they’ll be hard pressed to tell you where you can improve. In essence, with rare exception, accountants don’t know your business. Over the years I have learned that we need to look to accountants for help with one thing, and one thing only; reducing our tax liabilities.
So here are my recommendations if you want to build a more profitable business. First of all, make sure you are using a good accounting software program, such as QuickBooks. You’ll also need to make sure you have a well-designed chart of accounts, and you’ll need to have a general understanding of business finance. You don’t need an accounting degree, but you should have an understanding of terms like gross profit, operating expenses and cost of sale. Secondly, you will need to know the ideal targets for your key performance indicators. These are the numbers hit by the top shops in America, and knowing them will allow you to look at your income statement and quickly see where you are doing well, and where you can improve.
The third thing you will need to do is ensure you have a great accountant. When looking for the right person, you will need to keep two rules in mind. Rule number one simply states that if we put out peanuts we will get monkeys. Choosing an accountant is no different than choosing a good mechanic; you get what you pay for. There is a reason the cheap accountants are cheap, and the good ones are not cheap because they produce a good return on investment. Where do you find superstar accountants? You will find they typically represent higher-income earners that need to maximize their tax savings, so the best place to start is by asking your attorney, your doctor, and any other high income earners you know for referrals.
Once you have the right accountant, you will need to meet with them at least twice a year. Your first meeting should be during the first half of the year to review your shop’s year-to-date performance, to project your yearly income, and to start the conversation about your tax strategy. You should then meet again in the third quarter to ensure you are on track, and make any necessary adjustments.
In closing, the top-notch accountants will typically help you save a lot of money, and will ensure you are in compliance with all relative tax laws. The low-priced accountants? Just like hiring low-priced technicians, more often than not they will cost you an absolute fortune.