Demarest: Using Financial Data the Right Way: Avoiding Bad Decisions with Good Numbers

In the past, information was treated like sacred property and wasn’t often shared. If you wanted to understand more about your taxes, you had to hire an accountant or dig through tax books yourself. If you wanted to know more about your car, you had to talk to a trained professional with years of experience.

Fast forward to today—your customers (just like mine) have unlimited information at their fingertips. You might be saying to yourself: “Hunt, this business was a lot more enjoyable when I didn’t have to deal with customers who already ‘diagnosed’ and priced their jobs before they even walked in!”

Well, the same comparisons can be made with your financials and the sheer amount of data you have available at any given moment. Want to check your profit from last month? Click. Yesterday? Click. ARO, car count, GP, GP%—the list goes on.

But just like customers who misdiagnose their cars with bad information, if you aren’t looking at the right data, at the right time, in the right way, you could be doing the same thing with your own financials, using good data to make bad decisions.

The Importance of Accurate Data

The big assumption here is that we have an unlimited amount of accurate financial data – and the challenge is how to sift through it to focus on the key points instead of chasing our tails.

This is the first point many shop owners need to understand: if you want to make good decisions, you must begin with good data. If your data is flawed, don’t rush to make “the best decision” – fix the data first.

Think of it like this: you’re making hiring and firing decisions based on your shop management system’s end-of-day reports, but your inventory report shows negative inventory. That means your reports don’t reflect reality. You might make a decision that seems correct on paper, but because the data is wrong, your results will still miss the mark.

Where Your Financial Information Should Come From

As you might imagine, your shop management software should be the primary source of your financial information.

• QuickBooks will show you your end-of-month gross profit on parts.
• Your shop management system will show you what made up that profit.
• QuickBooks gives you an accurate monthly snapshot.
• Your shop management system shows live, daily trends as each job and sale happens.

Your shop management system should allow you to track how your team is performing against production and sales targets. In fact, it should act as the heartbeat of your business. If you know what the shop should be doing, you shouldn’t have to wait until the end of the month to see what you made. (Of course, you should always check the end-of-month reports, but you shouldn’t rely on them alone.)

Looking at the Right Numbers for the Right Problems

It can all feel confusing until you tie your numbers back to the specific issue you’re trying to solve.

For example, if your problem is low productivity, looking at end-of-month financials won’t help much. By that point, the reports only confirm what you already know – sales were low, costs were high, and the results don’t look good. End-of-month reports are useful if you want to see the overall cost of low productivity, but if you need to track productivity in real time, broken down by technician, your shop management system is the tool to use.
How you approach your financials will depend on the quality of your data, your experience level, and the specific issues you’re facing. At the core, though, using financials effectively is much like applying this scientific method:

• Identify the problem
• Find a solution
• Test the solution
• Analyze the results

This method creates a feedback loop – constantly identifying, solving, and testing.

Real-World Example

Shop A reached out because they weren’t making a profit, didn’t know where to start, and were just beginning to explore their financials. The problem was clear: no profit. Based on this, we knew QuickBooks would be our primary source of data.

From there, we used the financials to pinpoint where opportunities were being missed. Was it a parts margin issue? A labor production problem? For a shop that has never looked at its financials before, this is where a professional team – coaches, accountants, business partners – can make all the difference. They help you understand the numbers and guide you on what to look for.

Once a potential solution is identified, the next step is to implement it. For example, if we determine parts margin is the issue, we work with our coach to create a new matrix. At first glance, it might seem like the job is done – we’ve “fixed” the problem. But the most important step is still to analyze the results.

Let’s say our goal was to raise parts GP from 40% to 50%, which we believe is tied to the shop’s productivity. We track this daily in the shop management system to ensure expectations are matching reality. If daily and weekly indicators align with our goals, we can expect the underlying profit issues to be addressed.

A month later, we review the end-of-month financials to compare expectation versus reality. If the new matrix fixed the parts GP and overall profit issues – great! Celebrate that win. If parts GP improved but profits are still lagging, it’s time to implement and test another solution.

Most issues can be evaluated on a 30-day cycle, though larger projects may require months of tracking. There’s no one right answer because every shop is unique, with different goals and challenges.

In Conclusion

At the end of the day, the worst thing you can do is ignore the information at your fingertips. The second worst is trying to make decisions with bad or incomplete data.
Instead, verify your numbers, ask the right questions, and lean on your professional team for guidance.

I can’t promise the process will always be fun – but I can promise that looking at profitable financials is far more enjoyable than staring at a business in financial distress.