The Shop Management Show, AutoLeap’s new podcast, is back for part two of our focus on mastering cash flow in your business.Â
How should you prepare your income statement? And when will you need to review it? We checked in with an industry expert for a proper perspective.
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Recap from episode sixteen
In episode 16 of The Shop Management Show, I was thrilled to be joined by Chris Cotton, Owner of AutoFix Auto Shop Coaching.Â
Chris and I discussed:
- The upside of effective cash flow mismanagementÂ
- The consequences of mismanaged cash flow
- Overcoming hesitations to get started
- And much more
Check out some key takeaways from this episode.
The downside of mismanaged cash flow
We covered the upside of effective cash flow management in part one. But what about mismanagement?
Chris says that if you don’t have proper processes and procedures, your shop can experience a steady downward glide. And that descent can continue for years, specifically because you don’t have extra cash and your margins are too low but you still have to pay your employees.
Here are more downside examples that Chris shares:
Preparing your income statement
Your income statement, also referred to as your profit and loss (P&L) statement, will include your shop’s revenue and cost of goods sold (COGS).
Chris recommends you spend thoughtful time reviewing your income statement. What are you spending in each category? Where can you make adjustments?
Lean on industry benchmarks for the tweaks you make. For example, Chris recommends you aim for the shop’s parts cost to make up 20-23% of your total sales. If the number is higher, figure out why that’s the case and adjust as needed.
Run through this exercise once every month and see what accounts you have extra in. Over time, you can slowly adjust your allocations until they are dialed exactly how you want them.
Closing thoughts
Download this episode for more of Chris’ expert insights to optimize your shop’s cash flow strategy.Â
Subscribe to the Shop Management Show today! The podcast is available on Apple Podcasts, Spotify and most popular streaming services.
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