February 04, 2026

190 - Ask Me Anything: What Your P&L Is Really Telling You: Reading Your P&L Without the BS

1 hour 2 minutes

190 -Ask Me Anything: What Your P&L Is Really Telling You: Reading Your P&L Without the BS

February 04, 2026 - 01:02:24

Show Summary:

Cecil Bullard and Eric Joern break down why most shop P&Ls are confusing unreliable and overloaded with noise. They explain how inconsistent accounting practices distort margins and decision making, and why clean consistent structure matters more than perfect numbers. The discussion covers matching income to costs using accrual principles reducing unnecessary detail and using trends to spot real problems. This episode gives shop owners a clearer way to read their financials with confidence and control.

Host(s):

Cecil Bullard, Founder of The Institute

Guest:

Eric Joern, CPA, CM&AA, AAM, KAIZEN CPAs + Advisors

Show Highlights:

[00:00:02] – Why profit and loss statements matter for shop owners

[00:01:02] – Accurate P&Ls are rare and usually misunderstood

[00:02:22] – Accounting opinions create confusion and inconsistent reporting

[00:05:33] – Frankenstein P&Ls make performance comparisons impossible

[00:06:49] – Structure income and costs to clearly see gross profit

[00:10:33] – Long P&Ls cause decision fatigue and hide key issues

[00:14:15] – Misclassified wages distort margins and financial reality

[00:19:30] – Inventory purchases should not destroy monthly profitability

[00:26:19] – Every part and car needs accountability to prevent losses

[00:45:54] – Clean current financials matter more than fixing the past

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Episode Transcript Disclaimer

This transcript was generated using artificial intelligence and may contain errors. If you notice any inaccuracies, please contact us at [email protected].

Episode Transcript:

00:00:02:02 - 00:00:13:11

Cecil Bullard

Welcome to ask Me Anything. Today I have, with me, Eric Joern. If I, if I mispronounced it. Eric, just correct me.

00:00:13:14 - 00:00:14:12

Eric Joern

You got it.

00:00:14:14 - 00:00:42:25

Cecil Bullard

From Kaizen, CPA. They do. Accounting. And, you have an awful lot of our clients. Yep. Which many of those we have recommended because accounting is so bad out there. So. So you guys do a good job. Yeah. So today we're going to we're going to start out kind of by talking about profit loss, profit loss statements and why they might be important.

00:00:42:25 - 00:01:02:05

Cecil Bullard

And, of course, if you're out there, and you would like to ask a question or if you have any kind of a question at all, you want to do that, please put it in the comments. Rawley will be taking care of that for us. And, making sure we get those questions so we can get him answer.

00:01:02:07 - 00:01:26:20

Cecil Bullard

Let me let me start out here, Eric. I always make this kind of comment I have seen, I don't know, 10,000 pals in my life. And, and, I can count on one hand the number of pals that I've seen that are actually accurate. Well done. And give us the information we need, at least in the beginning.

00:01:26:22 - 00:01:39:26

Cecil Bullard

Yeah. What? Why? Why is it so? I don't know, why is it so bad out there where there's so much inaccuracy and so much confusion around the profit and loss statement?

00:01:39:28 - 00:02:01:10

Eric Joern

Yeah. You know, sometimes sometimes we have that we have that same question. But when we think about it right, there's a lot of moving pieces to generate a good financial statement. So first you have to have the right systems and processes set up. Then you have to have a you have the owner side or whoever's getting the data, collecting the data, doing the things right.

00:02:01:10 - 00:02:21:29

Eric Joern

So is my shop management system accurate? How am I paying my bills? How am I running payroll? Am I using the right payroll software? Are those things happening correctly? When I'm collecting things right, do I or how often do I go to the bank and deposit cash and checks and do things like that? There's all these input factors that go into an accounting hub.

00:02:22:01 - 00:02:48:18

Eric Joern

And then across that there are all sorts of different theories on accounting, right. Accounting really isn't black and white, right. Our job is to show economic reality for that business. So we need to show what actually is happening. Well that's opinionated right. And that's why, you know, the institute has a specific way that they like to look at a PNL versus maybe, you know, Joe Schmo, CPA on the street.

00:02:48:19 - 00:02:55:08

Eric Joern

Right. And and probably their goal is what's the easiest way for me to file tax return? And, you know.

00:02:55:08 - 00:03:19:01

Cecil Bullard

You know that. Oh go ahead. I think that that. So first of all, you're making it seem like it's very complicated, very hard. I don't I don't see it that way myself. So that that might be somewhere where I disagree with you. My my accountant. You know, we have a CFO in the company. And, you know, if we had an outside of B, you guys.

00:03:19:03 - 00:03:55:26

Cecil Bullard

But, they are tied into our bank accounts. So they see payments coming and going. They're tied into our credit cards, so they see payments coming and going. So all deposits are kind of recorded through the bank account. All, all outgoing moneys go through one account or another. And as well as credit. And then once we, once we determine what the PNL needs to be set up like, and we create, what we chart of accounts for that.

00:03:55:28 - 00:04:17:08

Cecil Bullard

Exactly. Then it it seems to be like it's not overly complicated at that point. Right? And I would agree with you that I don't think I would disagree in the, in the fact that the numbers are going to say what the numbers say. I don't I don't think that we can like say, okay, well, that that number is not what I want.

00:04:17:08 - 00:04:46:12

Cecil Bullard

So I'm going to go see if I can find another number. But, but certainly the institute likes to look at the finances differently than maybe, some of it's running, I don't know, a shoe store would look at their finances. And so that is probably challenging for you guys in the fact that you have, you know, different types of companies you work with that, you know, might look a little different than they might be for automotive.

00:04:46:15 - 00:05:05:29

Eric Joern

Yeah. And there's a lot of noise, right? So, so if you go out, you know, you go out into the Facebook groups and say, how should I have my pal there going to somebody's going to give them one direction and then they're going to go to their accountant, they're going to get a different direction, and then they're going to go to the institute or their coaching company, and they're going to get a different direction.

00:05:06:01 - 00:05:16:26

Eric Joern

And all that noise makes it really hard for them to, you know, what do I exactly do? Right. I, I need services or cost of goods.

00:05:16:28 - 00:05:18:00

Cecil Bullard

At the.

00:05:18:02 - 00:05:19:19

Eric Joern

Road. My wage.

00:05:19:21 - 00:05:20:22

Cecil Bullard

Is.

00:05:20:24 - 00:05:26:20

Eric Joern

Right. So I need to set up like this or that. We see.

00:05:26:20 - 00:05:33:00

Cecil Bullard

A lot of that noise that is causing issues. And so we actually see sometimes, when their financial statements.

00:05:33:04 - 00:05:56:01

Eric Joern

Almost Frankenstein, I'd say, meaning they brought in areas from different, different avenues and they put it all together. They said, oh, I like this idea. I'm going to implement this. I like this idea. I'm going to implement it this way. And then half of it's right here and half of it's here. And one of the things that we always say is, I'd rather have a financial statement that's consistently wrong than sometimes right.

00:05:56:03 - 00:06:14:16

Eric Joern

And I know that's a weird comment to make, but think about it. We're always measuring performance based on relativity, right? Did I improve from this from this prior measurement point? Well, if I'm constantly changing how I measure, I'm never going to have a relative measurement.

00:06:14:19 - 00:06:49:04

Cecil Bullard

But that's also probably one of the more difficult things for you guys is that, you know, whenever we we've changed accounting a couple of times in our business, you know, in the unknown, 15 years or so we've been in business, we've gone through, I think we're on our third different accounting. And every time it's like, well, we want to use QuickBooks and I want to use sage, and, and so we, we want to reset up and, and so if I'm not set up correctly in the first place, then I come in and I go, okay, I want to get set up this way.

00:06:49:06 - 00:07:23:29

Cecil Bullard

I might be getting different numbers are looking at different numbers than I had previously. Which got a good challenge, right? Absolutely. At the Institute for automotive, the way that I learned it was I want to have, as my income, any income source that I have that's over, say, 2% of what I do in business. So if I'm if I'm selling, if 10% of my business is tires, I want to have a tire income separated out from labor income and parts income.

00:07:23:29 - 00:07:53:03

Cecil Bullard

And then if there's a sublet income, I want to have sublet. And if there's, if I'm doing something like, some states we've got smog or we've got, safety, I want to I want to bring that income different because those things have different margins that I want to be able to look at. And so I want to have a relatively, I don't know, maybe 7 or 8 category sales taxes in there, but it's a pass through.

00:07:53:03 - 00:08:16:27

Cecil Bullard

So, but it still has to be accounted for in income. And then underneath that, and I think you have an example of a PNL that we can kind of pull apart here. But underneath that I want to have the same categories, as my variable expense. And, and that way I can see what my gross profit is.

00:08:17:00 - 00:08:28:04

Cecil Bullard

And I'm trying to make sure that my parts profit is right, that my labor profit is right, that my sublet profit is right. So that at the end I have the right gross profit.

00:08:28:06 - 00:08:48:07

Eric Joern

Exactly right. I mean, if we want to step back and say, hey, our our core framework for a good chart of accounts on a PNL is going to be I'm if I have a sales category, I should only have a corresponding cost of goods category for that. So if I had a sales category and I have no cost of goods, right.

00:08:48:07 - 00:09:12:16

Eric Joern

Is that truly a a operational revenue item, or is that maybe what we call other income? Right. Miscellaneous income that, you know, for instance, if we have an investment account, right, and we're getting capital gains and dividends and fun things like that, we're not going to report that. Or maybe I sell, maybe I, you know, customer doesn't pay their bill and I keep their car and then I resell that.

00:09:12:18 - 00:09:14:15

Eric Joern

Well, the gain that I.

00:09:14:18 - 00:09:25:13

Cecil Bullard

Wouldn't you handle that as, more on the balance sheet and then bring that in under the net profit as a additional income or a, additional loss or whatever.

00:09:25:13 - 00:09:47:06

Eric Joern

Under exactly non-operating, gain or loss on the sale of, of something. Right. And it kind of goes back to your 2%. Right? If it's not greater than 2%. We're creating distractions by adding that up into sales. And that's really one of the things that I like to focus on is, is we'll see a piano. And I mean, you've reviewed 10,000, right?

00:09:47:06 - 00:09:51:21

Eric Joern

I believe that's considered mastery when you, when you, when you hit 10,000.

00:09:51:27 - 00:09:53:21

Cecil Bullard

Yeah.

00:09:53:23 - 00:10:16:17

Eric Joern

And what we see is, what ends up happening is there's a lot of noise added to a piano. And what I call by noises. We have accounts and we have all these accounts added and all these things which in one respect, I understand. Right. I want to know if if you know, somebody is charging me more than they charged me the month before, do I think my piano per vendor should be per vendor to review that?

00:10:16:17 - 00:10:21:04

Eric Joern

Absolutely not. Right. Because then we start missing the big picture. I'll go.

00:10:21:04 - 00:10:33:07

Cecil Bullard

Into, I can't imagine, like, looking at all that data. Yeah. I mean, it would be there would be no way to really bring it all together and try to figure it out.

00:10:33:09 - 00:10:51:15

Eric Joern

I'm an accountant. This is what I do for a living. And if I'm looking at a piano that's 5 or 10 pages long, I'm lost. I'm burned out through part of it because you can only process some, Jeff Bezos, I think it was once said, if I can come in and make three good decisions in a day, that's a great day.

00:10:51:18 - 00:10:55:04

Cecil Bullard

Yeah, I don't I don't think I disagree with that at all.

00:10:55:06 - 00:11:14:29

Eric Joern

And if you can look at a if you if you're looking at it and I think about it on the same, same way with your piano, right. If, if it's 5 or 10 pages long and it has all this detail on it. Right, making a determination on each individual account, is it almost like a decision and you're going to get fatigued after so many of them.

00:11:15:01 - 00:11:45:12

Cecil Bullard

But you have a, you have a, an expanded piano and you have a, I don't know, simplified a simplified piano, which is usually a page and a half to two and a half pages at the most to simplify this. Great. And, that's how I want to kind of see my business. I mean, I want to see my business in chunks, you know, what what was my income was my direct expense for that.

00:11:45:14 - 00:12:08:19

Cecil Bullard

And then what was my net profit? And then what are my different categories? I think in we have a thing called a composite, which is different than a PNL. It takes, point of sale data and PNL data and kind of puts them together and makes the decisions for us. Does the math. Yeah, right. So how much did we lose because we weren't productive?

00:12:08:19 - 00:12:37:06

Cecil Bullard

Oh, we lost $17,043 this month, right. What was our average repair order? Oh, it was, know, $1,059.83. So I think that you want to look at your kind of in chunks, I look at I look at the income. Did the income match the income that we our goals and targets. Then I look at the expense.

00:12:37:06 - 00:12:57:20

Cecil Bullard

And the only reason I'm really looking at the direct expense is because I want to know profit margins in certain areas, because I'm. I know what the margins ought to be. Right. Yeah. And then then I'm looking at my overall gross profit. Did I, did I, you know, depending on how I, my PNL is set up, is it you know, 64%.

00:12:57:20 - 00:13:20:04

Cecil Bullard

Is it 74%. And, and then I go to the bottom line and I look at net before I go through everything else. Right? Did I make my 20% net profit? Bottom line is that, you know, is that does that make sense? Is that how you do it or is it would you recommend a different way to look at that.

00:13:20:06 - 00:13:53:06

Eric Joern

Yeah. Yeah. No no that's a a great way. And I'll, I'll give you an example. So I will review our QC before our, our client's financials gets out of our onboarding process, which is our creation process for somebodies accounting process system. To our production team IQ. See all those financials. And the other day I was reviewing one and I looked service advisor cost and technician wages were at significantly low margins, or high margins.

00:13:53:08 - 00:14:15:02

Eric Joern

The costs were very low. And it made me question, hey, how are they accomplishing this? I think I think tech cost was around 20% of tech labor or, tux labor sales. And the service advisor cost was around 3%. Well, then I go into the operating expense section, and we have some other roles in there, like a shop shop manager and shop foreman.

00:14:15:04 - 00:14:34:18

Eric Joern

So that made me ask, go back and ask my team. I said, okay, I know they told you that. That's what these roles are. Now we need to ask the next question, are they in production roles? Right? Is my shop is my shop foreman. Are they are they producing billable labor hours? Because if they are, then they need to be included up in tech wages.

00:14:34:21 - 00:14:56:14

Eric Joern

And same thing with my my store manager. Right. If they're performing a role of a service advisor, well then they need to be included with the service advisor. And all of a sudden when you move those wages up now we're more at realistic category or ratios. Right? Our gross profit looks a little bit more to what I'd expect.

00:14:56:16 - 00:15:16:15

Eric Joern

And and it's a very different skill to look at a financial statement to, to expect what it should be than it is to say, I'm going to put the inputs in. And I think if I put the inputs in, it comes out right. You have to review a financial statement. What's the thinking of what should it look like?

00:15:16:17 - 00:15:38:00

Cecil Bullard

Well, the I think when you've looked at many, right. There's a point where you say to yourself, okay, this is out of whack, right? This that's and that's the my like my fifth step. Once I've looked at my net, then I'm going, okay, what are the expenses look like, and where are we? Out of whack.

00:15:38:00 - 00:16:03:19

Cecil Bullard

Right. If my labor cost is 20% of my labor income, I'm not. I'm either not paying people enough or I'm not accounting for all the income. It's it's somewhere else, right? Exactly. And we we see that all the time. You know, in December, I don't even want to talk about December 11th people, because so much is thrown in different places.

00:16:03:19 - 00:16:05:06

Cecil Bullard

But we just cleaned.

00:16:05:06 - 00:16:07:08

Eric Joern

Up the tax return.

00:16:07:10 - 00:16:37:19

Cecil Bullard

Yeah. It's amazing to me, sometimes how just how badly it is, and what I'm trying to do is figure out, you know, I need something to compare it to so that I can then go. Okay, we've got a problem here right now. I had a $35,000 charge on one of my account, one of my accounts, and we lost, $31,000, and we had, stellar month as far as sales go.

00:16:37:22 - 00:17:13:06

Cecil Bullard

And you're trying to figure out, okay, where did that money go? Right. And there was 35,000 for, I think it was there their tax, their property tax, and it was all dumped in in one month in one pile. And then there was another 20,000 in, owner wages because they, they paid the tax. Right. So you see, either a bonus, or a dividend or whatever into the owner wages and you're like, okay, well, you know, we made $25,000.

00:17:13:08 - 00:17:35:17

Cecil Bullard

We didn't really lose 34% on this thing. But I think you need, at least for me, when I'm looking at my financials, I need to know that we're profitable. I need to know that we're profitable enough. And I need to be able to point out the two or 3 or 5 areas where we're not hitting the targets the way we need to hit the targets.

00:17:35:22 - 00:18:03:15

Cecil Bullard

And so I, I agree with you. I think I, I wouldn't say consistently wrong is better than inconsistent, but I want consistent data and consistent reports. Now here's kind of another thing that I, I like, I like to see my columns, you know, how you have all the here's the categories and then you have here's the income that came in, here's the expense.

00:18:03:18 - 00:18:34:08

Cecil Bullard

I let I also like to see, in there a percentage of what the sales was. So, so with the, the number, I like to see the percentage. And then I like to have a second column right next to it. That is last year this month. So I can compare like like data, with the percentages. And then I like to have a third column, which is the last running three months.

00:18:34:10 - 00:19:06:29

Cecil Bullard

And the reason I like the last running three months is because these guys, shop owners, do unusual things with how they record stuff like I might buy $10,000 in oil in one month, and instead of putting it in an in the inventory on the balance sheet and then dealing with it in the PNL, as I take it out of inventory, I just put a $10,000 charge, and it looks like parts margin was completely blown this month when it really wasn't.

00:19:06:29 - 00:19:30:12

Cecil Bullard

So if I can see a running quarter like three months, it will kind of leverage that average. That stuff out. Do you guys, do you guys recommend that they account for things like $10,000 worth of oil on the balance sheet and not on the PNL? Or how do you recommend that that be done? Yeah.

00:19:30:14 - 00:19:50:22

Eric Joern

All right. Deals set up for for parts costing is purchases go to inventory. And when we close a repair order we journal entry the cost into cost of goods. So that's true. True parts costing I mean it's what we we as accountant. Right. And this is what blows my mind. This is what we learned in college at a cost accounting.

00:19:50:24 - 00:20:12:05

Eric Joern

That's exactly how they taught us to do cost accounting. But then we go into actuality. And I get it right. If we're filing a tax return and that's it, we're just going to when the money goes out, that's when we're expensing it. When the money comes in, that's when we're recording it as income. But if we're trying to measure actual performance of the business, you have to consider what are the economic realities of that of that month.

00:20:12:07 - 00:20:36:19

Eric Joern

Right. It's not you know, we bought bulk oil. We're going to use that oil over the next three months. If I expense it all this month, I'm going to make major profits the next two months. So we need to normalize things. And that's why, again, you look at a three month trend because that starts to normalize things. If you look at a one of our favorite reports is, a trailing 12 months, meaning I get to see every single month, every single month for the last 12 months.

00:20:36:19 - 00:20:40:03

Eric Joern

And I have actually an example of this. So we can we can pull off.

00:20:40:03 - 00:20:42:02

Cecil Bullard

And yeah, go ahead and pull that up.

00:20:42:04 - 00:21:06:03

Eric Joern

Yeah. Let's pull that up. And let's talk about what the benefits of looking at it this way and now this is more of a hey, I'm finding I'm finding trends that are happening, but also I'm finding, abnormal abnormalities. Right. There might be something that sticks out. So your $30,000 property tax bill should stick out, right. Because it's going to say 00000.

00:21:06:04 - 00:21:08:00

Eric Joern

Then $30,000.

00:21:08:03 - 00:21:08:14

Cecil Bullard

Right.

00:21:08:14 - 00:21:24:17

Eric Joern

Well and and then we know, hey the right process for that. That's actually again it goes on to the balance sheet. And I know we're you know, our title of this is reading your panel without the bias. And I think it might be a balance sheet or might just be a fun title, but

00:21:24:19 - 00:21:29:04

Cecil Bullard

It was probably a fun title.

00:21:29:06 - 00:21:49:07

Eric Joern

But again. Right, that payment should really go, you know, depending on how you're, you're paying property taxes, should either be a prepaid or you accrue that throughout the year. And then when that payment comes out, that's it all hits the balance sheet. Right. And again, the balance sheet is our holding place to normalize our financials. Make sure they look consistent month to month.

00:21:49:09 - 00:21:57:04

Cecil Bullard

So it sounds it sounds to me like you're recommending accrual based accounting and not cash based accounting. Oh much.

00:21:57:07 - 00:22:21:23

Eric Joern

Absolutely. And what we like to use the word modified accrual accounting because you know, are we going to say we got an internet bill, right. Largely the same bill every month? Does it make sense in our accounting process to enter the bill? And then at mark the payment or we just post the expense right when we pay it because it's the same bill every single month.

00:22:21:26 - 00:22:42:07

Eric Joern

We're going to treat that probably in a cash basis format, because it doesn't materially affect the financials. And it's more practical for a shop owner that's especially that's handling their own books to do it that way. Now, what we want to do is we want to highlight those major expenses and normalize them over time. Well, right. We are going to apply accrual treatments.

00:22:42:07 - 00:22:51:25

Eric Joern

The most impactful items on a financial statement because we want as as reliable results on these financial statements as possible.

00:22:51:27 - 00:23:04:09

Cecil Bullard

So we're looking at, PNL here. All of the names have been changed to protect the innocent. Yeah. What what is right about this?

00:23:04:11 - 00:23:28:12

Eric Joern

Yeah. So they they started going in the right direction. Right. So we got our, we have our parts sales, our labor sales, maybe some. There are some things that kind of get out of hand a little bit. They're in weird categories, right? We got this random $15,000 here. You don't really like seeing all those, you don't like seeing things that are are lonely on the on a rolling pad.

00:23:28:12 - 00:23:29:08

Eric Joern

All right, we see.

00:23:29:08 - 00:23:34:14

Cecil Bullard

Two parts sales categories with the same titles.

00:23:34:16 - 00:23:55:18

Eric Joern

Right? Yeah, I think it's just a title. Again. Right. It's. Hey, we you know, they made some mistakes. They didn't know what to do with that dollar amount. And then we have. But we do. We have good bones here, right? We have labor sales. We have parts sales. Maybe there's a couple items here. We got subcontractor sales.

00:23:55:21 - 00:24:18:17

Eric Joern

We got hazmat. Right. Those are all your your greater than 2% items. And maybe there's some slop in here that whatever. That's slop. Then we got things like your, you know, we talked about December pals, right. Here's, here's all your year end to just clean some things up of course. Probably the tax accountant jumping in there and just making some adjustments so they can file tax return again, I get it.

00:24:18:18 - 00:24:35:25

Eric Joern

That's a direction that that needs to happen, right? You don't pay your taxes, you end up going to jail or your business gets shut down. Needs to happen. But it doesn't help us make good decisions about our business. But we have those good bones in there. But, you know, we got all these extra accounts, like parts sold to third party.

00:24:35:25 - 00:24:43:08

Eric Joern

We have, you know, are we really measuring that? Any differently than our normal parts sales? If not, that's just noise.

00:24:43:08 - 00:25:02:03

Cecil Bullard

And it ought to be a know it ought to be in the parts pile. It's not enough. Yeah. Don't get me wrong. We have, companies that sell online, so let me have 20% of their part sales be online sales, and we're not looking for a 58% margin on online sales though, that we're looking for different margins.

00:25:02:05 - 00:25:16:22

Cecil Bullard

And so they will separate online sales. But if you're, you know, occasionally selling some parts to yourself or to your tax, just put it in part sales don't don't divide it out in a separate category. Yeah.

00:25:16:24 - 00:25:34:24

Eric Joern

Exactly. It creates noise. And and there's a way to handle it inside your shop management system. So that way it translates to the, the account, the financials the right way when you do that. I mean, ideally, right, if your technician is buying parts, you know, do we want to write a repair order and, and do it that way?

00:25:34:24 - 00:25:38:24

Eric Joern

I mean, ideally they just buy either directly from the parts vendor.

00:25:38:26 - 00:26:04:11

Cecil Bullard

Or ideally, but that in reality they're probably not right. They're probably the shop is carrying them at some point often. At least that's my experience. My experience is that the bulk of part sales through shops, the shop is creating a ticket or something, and then charging the tech when they get their paycheck or, you know, once a month or whatever.

00:26:04:14 - 00:26:19:00

Cecil Bullard

And certainly, you know, if that's what you're going to do, then you need to be creating a ticket because you need, accountability for the cost and the and what you you know, what you charged and the money that came in.

00:26:19:06 - 00:26:36:18

Eric Joern

So, yeah, if it runs through a shop, there should be an arrow on there. Any any car that touches your shop has to have an arrow. Any part that gets purchased through your shop has to have an arrow attached to it. Otherwise you lose accountability. The minute you say there's exceptions to that, you introduce the opportunity for theft.

00:26:36:18 - 00:26:40:23

Eric Joern

You waste not and you lose accountability for it.

00:26:40:25 - 00:27:03:09

Cecil Bullard

Yeah, invisibility creates, lack of accountability. The other thing is having had an audit or to, you know, if there is, slop or things that are missing, then the IRS gets to make their best guess and, and their best guess is is never in your in your benefit.

00:27:03:11 - 00:27:08:00

Eric Joern

Yeah. And it gets even worse. You start getting into state sales tax audits, right. Yeah.

00:27:08:01 - 00:27:12:03

Cecil Bullard

Did you, did they pay the sales tax on that. Right.

00:27:12:05 - 00:27:35:10

Eric Joern

Sales tax. Use tax. Did they pay it on the right. The minute they find one thing they're they're digging deep right there. They run somewhat like a business. Right. They find some if they don't find any evidence up front, they're going to stop digging pretty fast. They see something. If they see disorganization, slop up front, if they look at a set of financials and it doesn't make sense, they're going to go digging throughout everything.

00:27:35:12 - 00:27:38:12

Eric Joern

And the other thing are the worst.

00:27:38:12 - 00:28:07:15

Cecil Bullard

Yeah. And the other thing I think that that the shop owners, the average person probably doesn't understand is that the state sales tax is collecting sales tax from thousands and thousands of businesses. So they have data, and they have data that basically says if you're buying X amount of parts and you're you're in this type of business that you should be paying X amount of sales tax, right, and 100 and if you're, if you're outside of their window, right.

00:28:07:15 - 00:28:14:14

Cecil Bullard

The, the bell curve that that's an audit or that's a fine. Right. I mean.

00:28:14:16 - 00:28:26:06

Eric Joern

Literally they're going to look to triangulate your sales tax returns to your financial statements. Back to the your income tax return. Yeah. So yeah.

00:28:26:08 - 00:28:50:11

Cecil Bullard

The IRS does the same thing. I mean they have they have data on I don't 200 plus thousand automotive shops that have been filing taxes. Now I would think that that would be really confusing because of how many bad panels I've seen. Right. But they've normalized that data as best they can. And if you're outside their windows, then they're they want to look a lot harder, right?

00:28:50:13 - 00:28:52:19

Eric Joern

Absolutely, absolutely.

00:28:52:22 - 00:29:09:26

Cecil Bullard

So, on that panel that you have, there's an awful lot of, just crap, right? Tech a b c d what? Why, what's that noise there? Right. I mean, yeah.

00:29:09:28 - 00:29:29:23

Eric Joern

But it's the right, right thought process. Right? In our cost of goods, we have our labor cost, right? So they have the right idea, they know what they need to measure, and then they added complexity. They added noise to it. Right. We're not making business decisions based on what we're paying that technician on our panel. We're going to look at that costs relativity.

00:29:29:23 - 00:29:38:22

Eric Joern

And then we're going to look at things like, hey, what was that individual's efficiency. That's not a measurement. And you get off your PNL right. You have to use to it.

00:29:38:29 - 00:29:47:23

Cecil Bullard

That's a different yeah of different data set exempt. So I would only have the payroll category. That's it. And it would just the.

00:29:47:23 - 00:29:48:25

Eric Joern

One one item for.

00:29:48:25 - 00:30:17:27

Cecil Bullard

Technicians. Yeah. And then I like to see the text divide it out an above the line. And then sales below the line. And my management people below the line. And I like to see sales broken out from the rest. And techs broken out. Those three categories are kind of a necessity for me because I'm trying to manage sales cost and tech costs and then fixed expense costs.

00:30:18:00 - 00:30:18:27

Cecil Bullard

Right?

00:30:18:29 - 00:30:40:23

Eric Joern

Absolutely. Yeah. I mean, we even have right. More more noise here again. Right, right. Concept shop supplies we have here and we're probably charging shop supplies here as an income line. So we have the income and we have the cost line. That's correct. But then we add things like delivery and tax. So not only do we have you know, we can't make any decisions on those and we don't.

00:30:40:24 - 00:30:45:19

Eric Joern

Right. That's the cost of acquiring that shop supply. We don't need to break it out. That's creating.

00:30:45:19 - 00:30:59:18

Cecil Bullard

More work. When they created a category for tax because at 1.3 $10 on. And so now I have a whole new category that creates instead of just throwing it kind of in the pile.

00:30:59:21 - 00:31:18:08

Eric Joern

Yeah. Well, and this is again where I get to the point of there's so much, there's so much noise out, out. And if you go out and you just try to figure this out on your own and you're getting information from there and there and QuickBooks and you're doing this and, you know, now I got my Shopify invoice on here, and here's my cost for my shop supplies.

00:31:18:10 - 00:31:42:21

Eric Joern

But then I have my costs for my delivery, my costs for my tax. So I can understand why somebody naturally just says, I'm going to enter it in like that and actually with with wages. One of the funny things, we see it all the time, I don't think in this case it it didn't make sense for it to look like this, but we'll see that the, the wages, the wage cost is actually entered as the net check that goes to the employee.

00:31:42:23 - 00:32:03:03

Eric Joern

So right there on their payroll and they're withholding their federal withholding. The IRS is in payroll taxes and their 401 K contributions in retirement. And they only captured the not the net check. And I'm but I'm like no you're paying them. They're choosing to take some of their money that you paid them and give it to those different parties.

00:32:03:06 - 00:32:14:26

Eric Joern

That's still just their wage. That's not the net check. But hey, that's what came out of my bank account. Right? So if I go in and I run payroll in QuickBooks, it's going to come through as a net check to my employee.

00:32:14:29 - 00:32:40:15

Cecil Bullard

But no, that's really I mean, because we have, employees and they're going to we're paying for like and futa and worker's comp and, and worker's comp is not a cost. That is their cost. It's my cost. But ficken futa is at least in part their cost. Yep. Because we're taking money out of their check. And then if we have a for one can we have a for one k here.

00:32:40:15 - 00:33:05:10

Cecil Bullard

So we take money from your check and we hold on to it. And then we do whatever matching and we pay out like we would like in futa. Yeah. And and so we have to whatever your whole gross check is, that's what needs to be reported. And then the other things that come out that are your costs, we don't really care about.

00:33:05:15 - 00:33:09:07

Cecil Bullard

It's the things that we pay that we care about as far as the company goes.

00:33:09:09 - 00:33:28:06

Eric Joern

Exactly. And again, right. If you only build your pal based on where the money comes out of the bank, right? The batch that goes directly into your employees accounts, whether it's direct deposit or checks. Right. That's a separate payroll. I mean, you might have something called impounding done. If you're using a payroll provider, that's a whole different story.

00:33:28:06 - 00:33:45:29

Eric Joern

Right. And then then there's no making sense of how that money happens unless you get a breakdown report from them. But yeah, if you're only following the cash flows, right, you're going to improperly account for and we see that time after time after time again, when those expense ratios don't look right, you know, hey, it's time to dig in.

00:33:45:29 - 00:34:09:18

Eric Joern

Let's figure out what's the answer. Okay. Yep. We found out that we didn't record payroll, right. Your payroll taxes look super high, right? They should only be. You know what? Seven, maybe 7 to 10% of your total wages paid? Not, you know, 20 to 30% of the total wages paid. Again, understanding those ratios helps you figure out is this even an accurate financial statement?

00:34:09:20 - 00:34:32:04

Cecil Bullard

But also, I would think that if you had a an audit from the IRS and they came in and they said, well, wait a minute, you you've shown this cost here, you didn't really show the money you pulled out of their account and you put in here. And so now your taxes aren't going to be right. And we're going to audit you and you're going to OS, X, y, z plus.

00:34:32:06 - 00:34:58:00

Eric Joern

At the very least, it's going to cause them to start digging. Right. And when they're not, when they start digging, they're end up finding record keeping. That's not proper. And that's, you know, you could be doing everything right. But you I didn't keep these receipts. I didn't do treat this weird thing right. I mean, I think now we have three different ways that meals are taxed depending on who you're eating with and why you're eating a meal.

00:34:58:02 - 00:34:59:00

Cecil Bullard

00:34:59:03 - 00:35:10:29

Eric Joern

So there's a lot of complexity that was that was built and that's on the tax side of things. Right. That's not even on just your pal, but that hey, now I have one meals account. How do I properly handle that from a tax standpoint.

00:35:11:02 - 00:35:31:20

Cecil Bullard

Yeah I have to do two meals two different meals account because often I'm either out traveling and having a meal because I'm out, or I might be with a client having a meeting and a meal is a part of that. We actually have three, because then we also do events where we provide food, which is a different tax category altogether.

00:35:31:20 - 00:35:32:11

Cecil Bullard

So yeah.

00:35:32:11 - 00:35:49:10

Eric Joern

And shop owners. Right. Hey, hey, we're doing our lunches on Fridays to celebrate the week. And then we do our lunches on Thursdays for training. And then, you know, hey, maybe I took a customer out to eat again. All have now have different tax treatments. It's, it's complexity.

00:35:49:13 - 00:35:56:19

Cecil Bullard

How many? Not purposes. How many pages is the federal tax code now? Oh.

00:35:56:21 - 00:36:04:01

Eric Joern

I think I think it travels around the world and something like, 100 times or something like that. If you lay them page by.

00:36:04:01 - 00:36:05:02

Cecil Bullard

They say.

00:36:05:08 - 00:36:11:25

Eric Joern

Yeah, it's it laps the world so many times I can't remember the exact number, but so let's.

00:36:11:28 - 00:36:30:28

Cecil Bullard

Let's see if we can bring it, make it smaller for shop owners here. What, what? Keep it simple, right? Yep. Make sure and I, we have a sample, like, what do you want to call it?

00:36:30:28 - 00:36:31:29

Eric Joern

Chart of accounts.

00:36:31:29 - 00:36:58:21

Cecil Bullard

Or. Yeah. Yeah. Excuse me. And you've seen ours because I know I've sent it to clients and to you guys, and you guys do a good job of making those things happen for our clients. So keep it simple, right? Because I have the detail I can always print out later if I want to print out detailed to find problems.

00:36:58:24 - 00:37:13:19

Cecil Bullard

And then, what do you think's the biggest mistake or the biggest? Top two mistakes that are made by small business owners, trying to do accounting or bookkeeping. Yeah, well.

00:37:13:22 - 00:37:19:03

Eric Joern

The number one thing is they don't they don't know what a balance sheet is, and they've never looked at it.

00:37:19:06 - 00:37:46:19

Cecil Bullard

Yeah. By the way, I've seen if I've seen 10,000 panels, I've seen 10,000 balance sheets. And I could name on one finger the balance sheets that I've seen that were actually accurate. I have seen so many balance sheets where there's what's this, $150,000 here. Right. And oh, that was something that 25 years ago when we bought the business, that was something we quote unquote depreciated or we did whatever.

00:37:46:22 - 00:38:14:13

Cecil Bullard

And it's this, it's this dead or something that's still hanging on and has not been accounted for at all. Yeah. And, and do you think, do you think it's a laziness from the bookkeeper, accountant, accountant person of just like, I'm not going to I'm not going to spend the time to do that because no one's ever going to really look at it, or it doesn't really make any difference.

00:38:14:15 - 00:38:37:06

Eric Joern

I think there's definitely that. Right. You know? Hey, the the piano has a lot of effect. It has a lot of impact. Meaning that's what's going on my tax return and I'm paying tax on it. It's probably what I'm using to make my business decision. So it's got a lot of impact. Those are two very impactful things. My balance sheet unless I go to a lender right, a lender is maybe going to think you're what's my current ratio.

00:38:37:06 - 00:38:46:00

Eric Joern

Right. Does my current assets cover my current debt. And then if they're like, hey, why do you have negative, how do you have negative that what is that?

00:38:46:03 - 00:38:49:07

Cecil Bullard

And how does that balance sheet not balance. Right.

00:38:49:07 - 00:39:12:29

Eric Joern

I mean I've seen that a couple times. Right. Fortunately the softwares prevent you from doing that. But we see things on the ballot. Yeah. If a balance sheet is not accurate the PNL cannot be accurate. Right. Because if it's on the balance sheet then it's not on the PNL right. Meaning it cannot be accurate. So in our opinion, that is by far the number one thing is we see pretty panels and we see messy balance sheets.

00:39:12:29 - 00:39:17:14

Eric Joern

You know, you say, well, as nice as your pencil looks, it can't be right.

00:39:17:16 - 00:39:35:22

Cecil Bullard

So we have a question or two. Should I have discounts shown on the PNL? And if I do, should it be split from parts and labor? So if I am discounting, am I taking that money in and then taking that money out as a discount? What's your recommendation?

00:39:35:24 - 00:39:53:15

Eric Joern

Yeah. So the the discount line needs to be, needs to be there. Right. So we're going to show our gross labor sales. We want to know how much we're discounting. Now whether to split it out between labor discount and parts discount. Right. Really depends on your policy. In this case.

00:39:53:15 - 00:40:16:14

Cecil Bullard

You're trying to if you're trying to look at parts margin, which we want to be 58%, and you're trying to look at labor margin. And as a loaded labor margin, I want that to be around 64%. Then if I don't if I'm in, I'm discounting either all in part or all in labor. Then I'm going to get some funky numbers.

00:40:16:21 - 00:40:37:10

Cecil Bullard

Right? And that's kind of point out to me some, some issues, but it'll be it'll be harder to put your finger on where the problem is. Right? Somebody that's seen a lot of panels and a lot of mistakes made will will get it faster. But for a general shop owner, you're just not going to see it. Yeah.

00:40:37:13 - 00:40:54:16

Eric Joern

Yeah. I mean it really depends on the materiality of how you do it. Right? If I you know, this case, you know, they've issued $2,000 parts discounts through a year. Do I want to keep an extra line item for that. Probably doesn't make sense. Right. We're going to have one discount line because we know and we know how we run our business.

00:40:54:16 - 00:41:00:07

Eric Joern

We're going to discount labor. And that's their choice. On how they're doing that. So that's how we're going to measure it.

00:41:00:13 - 00:41:07:27

Cecil Bullard

But it's also kind of kind of wonder was this really a discount or was this like a bad debt you wrote off. Right. Because of the way it's.

00:41:07:29 - 00:41:08:21

Eric Joern

How you handle it in.

00:41:08:25 - 00:41:23:07

Cecil Bullard

Seven months with nothing. And then all of a sudden you got, you know, a couple of months with stuff. And that's a good point. Yeah. I would be going. I'm not even sure that was a discount at this point. Did we account for a bad debt in the wrong place?

00:41:23:10 - 00:41:42:10

Eric Joern

Right. Yeah. And to me, discounts are a separate issue than parts and labor margin. Right. Because we're measuring parts of the labor margin at our stated, you know, our stated rate. And then we have discounting. Right. Discounting to me is a whole separate thing than pricing. Pricing is what am I setting? What am I selling a labor my labor for?

00:41:42:10 - 00:42:00:25

Eric Joern

What am I selling my parts for? Then I have a discount, right? And I have an allowance, right? We probably set budgets on how much we're willing to discount at each month, and that's how I'm holding my discounts accountable to my team, is based on what budget did I set and and did I? It really doesn't matter which bucket you chose it from at that point, right?

00:42:00:26 - 00:42:15:19

Eric Joern

Because that because that all ends up in the same gross profit. But you have to know that these are two, two separate different things because discount rate your labor rates, your labor rate, your parts margin matrixes, your parts matrix discounts is a separate action.

00:42:15:21 - 00:42:41:26

Cecil Bullard

And I see shops, that discounted $12,000 and didn't make two. And and you're you just shaking your head. There's there's a question here. Jensen, did you say service wages is not in cost of goods sold? What I said is that I like tech wages, so I don't know what you. If you're calling service wages. I'm not sure what you're saying.

00:42:41:29 - 00:43:16:24

Cecil Bullard

I like the tech wages in a cost of goods sold. But I want the service advisor. My sales cost under and under the line in a, like a fixed kind of in the where the fixed expenses would be separated out a, so, yeah. Got to have got to have clarity around, what you're talking about, but, definitely for mine and for our clients, we want to see the technician wages and, above the line, and above the line, below the line.

00:43:16:26 - 00:43:28:25

Cecil Bullard

So you have, variable expenses, parts labor, etc., and then you have fixed expenses, and the variables are above the line and fixed or below the line.

00:43:28:27 - 00:43:51:15

Eric Joern

Yep. Yeah. We're we're at a 100% agreement. If you happen to move service advisor up into cost of goods, maybe that's just how you've always done it. How you have your historical data, measured. You know, you just need you know, now, you you've moved the goalpost, right? So if our goal was 65% GP, now it might be 55% GP because we include service advisor.

00:43:51:15 - 00:44:12:20

Eric Joern

So you just have to understand the relativity of how you structure it. But again, right. If you were comparing panels in a peer group. Right. We want everybody to do things the same way. So we're measuring apples to apples. The more variability you add into how we measure things and what you're comparing them to. Now all of a sudden you might have incorrect measurements.

00:44:12:22 - 00:44:35:11

Cecil Bullard

And it's funny because I ran 20 groups for years and we have quite a few here groups and, and after, I don't know, 15 years, you find out that the one guy is measuring something in a completely absolute different way than somebody else is measuring it. And so you've been comparing this data. They've been in the group for 15 years and you've been comparing data.

00:44:35:13 - 00:44:57:20

Cecil Bullard

And then all of a sudden somehow you're having a conversation like, oh yeah, that's this, this and this. And you're like, no, it's really not. So that makes it difficult. That's why we do the composite, data stuff so we can kind of decipher the data a little differently to make the peer group be able to have relative data.

00:44:57:22 - 00:44:58:27

Cecil Bullard

Exactly. Yeah.

00:44:59:00 - 00:45:14:08

Eric Joern

The data hygiene is so important that, it's a big challenge that we want to. Especially when you come with industry wide data. Right? Is it has not been cleaned up enough as, as it has inside of a reporting composite. Like what you guys have.

00:45:14:11 - 00:45:43:00

Cecil Bullard

So we we I've recently sent you guys, I don't know, 4 or 5 clients that it's really a mess. I mean, it's just a disaster. And and, do you, you said earlier that, you know, bad data. As long as it's consistent, consistency is probably more important than being 100% accurate. Do you? Would you say, like, bite the bullet, get it cleaned up and start moving forward?

00:45:43:00 - 00:45:54:13

Cecil Bullard

Or would you go back a certain period of time to try and clear that data up? So that you can create a, a broader, view of things?

00:45:54:16 - 00:46:11:06

Eric Joern

I'm going to give you the the perfect accountant answer. It depends. If I am somebody who is likely to go out and get that in the near term, meaning I'm going to go do an acquisition, I might need to clean up a few years because I'm going I might lose my ability to go get that, if I don't do that.

00:46:11:08 - 00:46:35:24

Eric Joern

But for the most part, you know, 80% of the shop owners that come in our door, it's more important that we focus on moving forward than going backwards. So I'd say 80% of the time we might in those cases, we're going to start a brand new file, accounting files use the last file tax return as our starting point and focus really on clean data going forward for the current year.

00:46:35:27 - 00:46:55:10

Cecil Bullard

So is there any reason that I would say, okay. It's I don't know, it's, August and, we know that our financials are a disaster, and now I'm going to wait until December because that's the quote unquote end of my year.

00:46:55:13 - 00:47:17:09

Eric Joern

I'd probably go back to January 1st and and bring it, bring it forward through that current year. I might not go back and re clean up, you know, 2025, 2024 or 2023 if especially if we have a tax return filed again, unless. Right, hey, I show losses in those years that doesn't make a whole lot of sense to me.

00:47:17:09 - 00:47:35:20

Eric Joern

And I need to go out and get a loan from a bank, right? We might want to clean that up or hey, I, I have I have people interested in buying my business and we need good historical financial data. But for the most part, the cost of us going back and cleaning up prior years is is too much.

00:47:35:23 - 00:47:42:01

Eric Joern

It's too much, and it's a distraction from getting the current information clean and and right moving forward.

00:47:42:03 - 00:48:07:18

Cecil Bullard

But I would say as, as a coaching consultant, that I don't care if you're 25 or you're 85, and if you own a business, you should have a plan, an out plan. And if I don't have good clean data, at least for three years, I'm not going to get paid for my business the way that I should be paid for my business.

00:48:07:20 - 00:48:32:08

Cecil Bullard

And so whatever you're going to do, port in my in my brain, poor accounting, it's it could cost you hundreds of thousands of dollars. Oh, 100 in, in the short term, really, and, and the long and the long term,

00:48:32:11 - 00:48:33:18

Eric Joern

I just.

00:48:33:20 - 00:48:51:11

Cecil Bullard

Yeah. And, I don't know, I get a lot of, I don't know how, how often, but an awful lot of people saying, hey, I want to go buy the shop, or I'm looking at this shop or whatever. So what do you think it's worth? We do this a lot, and I'm like, okay, give me three years worth of profit and loss statements.

00:48:51:11 - 00:49:19:02

Cecil Bullard

Give me that good balance sheet. And, you know, and, let's run some reports out of the point of sale. I'd like to know what the average repair orders and few other pieces of data. And then I can tell you with a three other questions, pretty much within a few dollars of what that business really is worth. But if the data is if I can't get three years, I had a guy in, Northern California go to buy a shop mini, this few years back.

00:49:19:02 - 00:49:51:17

Cecil Bullard

And he's like, so I need to look at it. And, supposedly there was a few hundred thousand dollars of cash that was not in the on the panel. And so the business is worth 800,000, but the Pal only supports 200,000. It doesn't support 800,000 because that money can't be accounted for. Yeah. And the, the broker was arguing with me that that 200,000 was legitimate and should be accounted for.

00:49:51:17 - 00:50:12:16

Cecil Bullard

And I was saying the bank won't account for it. I can't get a loan for it. So the answer is no. And it also clouds the other data. You know, when you're looking at, say, parts margin or labor margins, and you look at that business, you say, well, man, they're really poor. I know I can make them better because that's what I do for a living.

00:50:12:18 - 00:50:39:05

Cecil Bullard

And, so I think there's hidden value in this business, but there isn't really, because it's $200,000 in parts and labor that you pulled off that you paid for, but you pulled it off and took it in its cash. So those margins with that cash in there would have looked a lot better. And what we really found was that there were also all the employees had been paid cash off the books for several years.

00:50:39:08 - 00:50:59:21

Cecil Bullard

Because the guy I told not to buy the business bought it anyway and overpaid for it anyway. Yeah. And, it's it's scary what you what what really happens? What you really see here absolutely scares the crap out of me sometimes. I think we got a question.

00:50:59:23 - 00:51:05:00

Eric Joern

So. Oh. Warranty. Oh, fun. Yes.

00:51:05:03 - 00:51:06:12

Cecil Bullard

Great question. Go ahead.

00:51:06:14 - 00:51:34:04

Eric Joern

Yeah. No. So this is important that you handle it properly in the shop management system. We don't we don't use the discounting function to handle warranty. Right. Most shop management systems have an ability to call other payment types. So, I'm assuming you're talking about a, an internal warranty, right? We have a comeback repair that we're doing, or we offer a three year, 36 on breaks or, you know, we pay for the brake job, whatever it may be.

00:51:34:06 - 00:51:51:25

Eric Joern

We're going to have a a other payment type. So we're going to write up that repair order and we might what we want to do is kind of neutralize that effect on our on our gross profit margin. So we're going to write the parts around costs. We're going to write the labor around costs. So we might have a set rate that we use for what we do.

00:51:51:26 - 00:52:07:06

Eric Joern

Also what we do to work on an internal like shop owned vehicle or maybe, hey, me as an owner, I've a my vehicle is owned by the shop. We're going to write those repair orders like that because I still need to pay my technician. I still need to account for the part. So those in need on a repair order.

00:52:07:06 - 00:52:26:26

Eric Joern

Exactly. Now, if I pay my service advisor on gross profit and I say zero out, that repair order, or I discount that repair order, now that's a negative gross profit to my service advisor for something that paid. They're not really accountable for. So we like to neutralize the effect on gross profit.

00:52:26:29 - 00:52:55:01

Cecil Bullard

And we actually had multiple warranty categories that we paid out. So we had tech error. We had parts failure, and we had just, you know, give away, and we had warranty legitimate, you know, that brake job, we warranty it for three years. It failed at two years. And we're going to redo the whole thing, as part of the warranty is not anybody's fault.

00:52:55:03 - 00:53:06:05

Cecil Bullard

Not really part's fault? Not really the tech error. Yeah, it's a legitimate warranty. So we had, a minimum of four categories that we could look at.

00:53:06:08 - 00:53:28:27

Eric Joern

Yeah, I like to keep that level of detail at the shop management system level. Maybe when it routes to your pal, you might have one line. Yeah. For all those things that your, I guess, quote unquote eating. Right. Because then we're looking at that, hey, I have a problem now we're going to go back to the source and say, okay, here's my four item break down inside my shop management system, and I'm going to then address, you know, that's a performance problem.

00:53:28:27 - 00:53:31:03

Eric Joern

So I'm going to address it from there.

00:53:31:06 - 00:53:50:16

Cecil Bullard

As a as a consultant. I like to know where the warranty is coming from because then that can focus me in a direction that I can put a solution in place. But as far as the PNL, I just need to know that my overall warranty is below a certain percentage. And so I like to see that.

00:53:50:16 - 00:54:12:03

Cecil Bullard

And that's another reason why I like to have the percentages, in the column. And I can tell you even today, the panels I get and I see hundreds every month, most of them don't have the percentages. I even got one last week where it was, December. And then it was the total, but it was only December's total.

00:54:12:03 - 00:54:41:12

Cecil Bullard

So there were two columns, but it was the same column with no percentages. There's there's no that there was no benefit to a second column. That's just a copy of the first column. Yeah. And, you just wonder why someone isn't paying attention to that. Who probably should, right? Yeah. And is that is that my is that my bookkeeper or my accountant's responsibility to go, hey, these are things that you should be looking at or is that not.

00:54:41:14 - 00:55:01:07

Eric Joern

So I will say we've built we've ran into some limitations in the software inside of QuickBooks about being able to generate those reports. What the detail that we like to look at, exactly what you described, where you have like the either a trailing three months or a year to date comparison, along with the single month comparison with the percentages.

00:55:01:09 - 00:55:23:21

Eric Joern

Well, that's outside of the ability for QuickBooks to generate a report with that much data on it. So we've actually we use another software that that plugs into QuickBooks online, in which we can further customize and build our deliverable with those different reports like that, because we also found that issue of, hey, hey, if we can't add percentages here, you know, you lose some relativity to that.

00:55:23:21 - 00:55:43:14

Cecil Bullard

Report and for me, the financials, I mean, obviously I want to pay my taxes and I don't want to be audited. And if I'm audited, I'd like it to be clean. Yeah. I cannot tell you how many shops we've come in. I had, I can give you, at least one example. Father and son, they owed the IRS 300,000.

00:55:43:14 - 00:56:02:27

Cecil Bullard

And I'm looking at their panels and their accountant had been a bookkeeper, had been double accounting income. So the income that they had reported and stated was not the income that they really had. And so when it was all said and done, we kind of, sent it through what I would call a forensic accountant. We cleaned it up.

00:56:03:00 - 00:56:05:20

Cecil Bullard

They really didn't owe the IRS much.

00:56:05:22 - 00:56:09:10

Eric Joern

We only have a three year statute of limitations to to correct that.

00:56:09:12 - 00:56:39:13

Cecil Bullard

Yeah. And, which. Yeah. And I've seen that happen a lot of times too, which makes me a little, a little nuts. All right. I think we had, like, a last question. I think we're getting to the end of this thing, credit card processing fees charged, separate line. Yeah, I, I always have credit card processing fees, and there should be a line for it as a cost in a below the line.

00:56:39:15 - 00:57:00:11

Eric Joern

Yeah. So so they're talking if they charge for that. So if they charge for the fees, they pass it along. There's a few different ways to do it. I do think that that's a now an income item. Right. And we might actually bring up the cost or we might even apply the cost against that income, because it's really a pass through at that point.

00:57:00:13 - 00:57:01:03

Eric Joern

So we might.

00:57:01:03 - 00:57:03:02

Cecil Bullard

Have interesting philosophy. Yeah.

00:57:03:02 - 00:57:13:08

Eric Joern

Yeah. Yeah. So if we're, if it becomes a pass through because we charge for that credit card fee, you know, we might only record the net additional or cost that we have.

00:57:13:10 - 00:57:26:06

Cecil Bullard

So you're saying, I'm going to report the $4,000 ticket as an income, but I'm also going to report the, I don't know, $40 that the credit card company is charging me to do that $4,000 ticket.

00:57:26:08 - 00:57:49:21

Eric Joern

Yeah. So if we charge, say, $50 and, you know, our credit card fee and it costs us $40, right, we'd have a net $10 of income and we might report it just as a straight net $10. Again, that's a little bit newer. And we're still trying to understand how that really relates to how we do pricing, how we analyze gross profit, things like that on a financial.

00:57:49:24 - 00:57:57:08

Eric Joern

I mean, I think maybe the last 12 months is when people have started really adopting. We're going to pass on credit card fees to our customers.

00:57:57:10 - 00:58:22:01

Cecil Bullard

Yeah, I see that to it's very I'm seeing it at, the questions coming up more and more. We've never we haven't primarily in the past. But the question is coming up more and more now. All right. Before we before we wrap it all up, we have this financial intensive April the 23rd.

00:58:22:01 - 00:58:24:09

Eric Joern

2020 third and 24th.

00:58:24:11 - 00:58:29:18

Cecil Bullard

Yeah, I think it's 23rd and 24th. It might be 22nd, 23rd, but I'm pretty sure it's the 23rd and 24th. They total.

00:58:29:18 - 00:58:31:00

Eric Joern

23rd. 24th.

00:58:31:00 - 00:59:00:01

Cecil Bullard

Yeah. Okay. And and this we're going to be really teaching the importance of good, accounting. Good bookkeeping. And also, the things from the coaching perspective that you need to look at and what they mean to you and what that so I can look at a PNL and I can say we have a problem with parts the way we market parts.

00:59:00:01 - 00:59:19:20

Cecil Bullard

Or I can look at a panel and say, man, we're not charging enough for our labor, because of the variance between parts and labor as a percentage. And so we're going to be teaching like we're going to get into the the nitty gritty, but without getting into the nitty gritty, it's not going to be an accountant thing where we're going to go through every line and go line by line.

00:59:19:20 - 00:59:42:02

Cecil Bullard

We're going to we're going to be really teaching the basics in how to really understand your business in a financial model. And you guys are going to participate in that, which is fantastic. I'm excited. We're already have quite a few people that have signed up for that. If you use the QR code here, you can get signed up for that.

00:59:42:02 - 01:00:09:13

Cecil Bullard

It's a, I don't know. I think it's a, I want to say two day class, but it might be three. I think it's extremely reasonably priced. And, we'd love to see you here in, in Utah for that. And I'm excited about it because this is like, my, my my Jones. Right. This is my this is my crack cocaine is this is the numbers and and and I'm not an accountant by far.

01:00:09:13 - 01:00:15:19

Cecil Bullard

And I don't know that I could be, but, understanding the business numbers for me, it's like it's crack.

01:00:15:19 - 01:00:34:23

Eric Joern

So you understand the impact it has on that business. Their generation. How it helps their technicians, their employees that work for them. And hey, even the community that that shop participates in, right? A more profitable, better shop is going to really have a better effect on the community as a whole.

01:00:34:25 - 01:00:56:04

Cecil Bullard

And I always say there's there's like for the average shop, the typical shop right now is making about 4% net, institute shots, a little over 18. We, we, we vary between 18 and about 22 for our shops. But but about half the stuff that you're going to do to make money to fix that. Pretty simple. The other half's a little more complicated.

01:00:56:04 - 01:01:21:17

Cecil Bullard

And you really need to understand your business like it's an engine and you need the right amount of fuel and air and and spark at the right time. And, and if you understand those things, it can make you not just thousands of dollars every year in profit, but it can make you tens of thousands or hundreds of thousands of dollars when you go to get, you know, sell your business or pass it on.

01:01:21:19 - 01:01:49:02

Cecil Bullard

And so, yeah, the industry, the institute, you know, better business, better life, better industry. We find that the more profitable the businesses, the better the owner understands it, the better they can manage people. The more money they make, the happier everyone is. And so. Yeah. So, please, consider coming to the financial class and, Eric will do this again.

01:01:49:05 - 01:02:05:25

Cecil Bullard

Yep. Here in the near future. And if you do have questions that didn't get answered, pass them in and we'll do our best to get you answers for those, thank you very much for your time today, Eric. Yeah, of course, we love you guys over at Kaizen. And, I hope I pronounced it correctly.

01:02:06:01 - 01:02:07:23

Eric Joern

I think you got it. I think you got to date.

01:02:07:25 - 01:02:16:01

Cecil Bullard

Us and shoot me. And, thank you for those of you that attended and had questions. Thank you very much. We'll see you next time.

01:02:16:02 - 01:02:18:13

Eric Joern

Thank you so much. Thanks. Thanks, everybody.

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