How should an auto repair shop tie parts invoices to repair orders?

Where does the repair order number have to be captured?

A part travels through up to three documents: the supplier's counter ticket or invoice, the shop's own issue record when the part comes off the shelf, and the repair order line that carries its cost. AccountingTools defines job costing as the accumulation of the costs of materials, labor and overhead for a specific job. In a repair shop that job is the repair order, so every parts document needs the repair order number on it or recorded against it.

The chain breaks wherever the number is not written down, and that is usually at the parts counter. Capture it at the moment of ordering or pulling: give the repair order number as the purchase order or reference number when you order, so the supplier's ticket and invoice can carry it. Where a supplier's ticket has no such field, write the number on the ticket when the part is received. When you order for the shelf or for shop supplies, give STOCK or SUPPLIES as the reference instead, and file the document to stock or shop supplies when it arrives. An invoice that arrives weeks later with no reference has to be matched from memory, and a month of parts cannot be.

Which document ties each kind of part to its job?

A routine built only on supplier invoices misses the second row. Parts taken off the shelf never reach a repair order, and job cost is understated for exactly the parts the shop uses most.

What should a shelf-stock issue record contain?

AccountingTools describes a material requisition form as listing items picked from inventory, usually for a specific job, and as serving to relieve the inventory records and charge the targeted job for the cost of the items requisitioned. So a stocked part stays in stock until its issue record moves it to a repair order. A paper issue slip or a shop management system's parts-issue entry does this work, and each issue should record these details:

• The repair order number
• The part number and description
• The quantity issued
• The date and the person who pulled it
• The unit cost from the stock record

Reconcile issues on both sides each month. On the purchase side, stock at the start plus parts invoiced or returned to stock, less parts issued, should equal what the stock record shows on the shelf; running a physical count and handling its difference is a separate subject, and so is recording stock purchases and their cost of goods sold. On the job side, every issue slip should appear as a line on its repair order, and every stocked part on a closed repair order should have an issue slip. A part requested but not issued, issued but not billed, or billed but never issued is where lost cost and customer disputes start, and the issue slip is the first record to check; a missing slip shows only that none was written, so run that down before treating the part as never issued.

How is sublet work tied to the repair order?

AccountingTools defines a direct cost as one that can be clearly associated with specific activities or products. An alignment, machining job or other outside service bought for one vehicle is a direct cost of that repair order, not a general expense. When you send the work out, give the provider your repair order number in writing; when it comes back, obtain their invoice number. Record the provider, their invoice number and the amount on the repair order's sublet line. A provider invoice that does not show your repair order number goes to the exception list; if it shows the vehicle's VIN, match it to that vehicle's open repair order and confirm the repair order number with the provider before assigning it.

What happens to shop supplies?

Rags, cleaners, small fasteners and sealants used across many jobs are what AccountingTools calls indirect materials: materials used in production that cannot be linked to a specific product or job. The same article gives two treatments: include them in overhead, allocated at the end of each period by some reasonable method, which it calls the more theoretically accurate; or, if the amount is small, charge them to expense as incurred. Either way, keep them off repair order parts lines. Splitting a supplies invoice across jobs by an arbitrary rule produces job costs that look precise but that no document supports, which is worse than an honest unallocated supplies cost. Building an overhead rate into job cost is a job-costing design question.

How do you record a core charge and close it?

A supplier bills a core charge with a rebuildable part, such as an alternator, starter or caliper, and credits it later when the old part goes back. The Tax Adviser, the journal published by the Association of International Certified Professional Accountants, describes a core charge that is refunded when the replaced core is returned in acceptable condition. The charge and the credit arrive on different documents at different times, so link them from the start:

1. When the invoice arrives, enter the core line on an open-core list with the supplier, invoice number, amount and repair order number.
2. Tag the old part with the repair order number and the invoice number, and keep it in a core bin until it goes back.
3. When it goes back, record the date and the supplier's return document number on the open-core list.
4. When the credit memo arrives, match it by the invoice number it cites, close the line and apply the credit to that repair order, even if the repair order has closed.

In the job record, the core charge stays in that repair order's parts cost until the credit arrives. Whether the books carry an open core charge as parts cost or as an amount due back from the supplier belongs to the vendor-credit question. If the supplier rejects the core, or it is never returned, the charge stays on that repair order: record the rejection or loss on the list and close the line. Review the open-core list weekly against the core bin itself. A core in the bin with no line, or a line with no core in the bin and no return recorded, is a problem to run down, and a returned core whose line stays open is a credit the supplier has not issued.

How do returns and billing corrections get back to the right job?

AccountingTools describes a credit memo as a seller's document reducing the amount the buyer owes under the terms of an earlier invoice. It is issued when a customer returns goods due to defects, damage or dissatisfaction, and may also correct billing errors, such as overcharges or incorrect quantities on an invoice. A credit for a returned part, a core or a billing correction therefore traces to the invoice it reverses, and through that invoice to the repair order that carried the cost.

Write the repair order number and the original invoice number on the return slip when the part goes back to the counter. An unused part kept for stock instead of returned needs no credit memo: write a return-to-stock slip with the repair order number, original invoice number, part and quantity, remove the part from the repair order, and count it as received into stock in the month's stock tie. A credit applied to whichever repair order happens to be open leaves two jobs misstated instead of none. Recording the credit in the books is the vendor-credit question.

How do the documents come together on one repair order?

Repair order 4512 covers an alternator, front brake pads and a wheel alignment.

Three weeks after the repair order closes, credit memo 5520 for 45.00 arrives citing invoice 88231. The open-core list points to repair order 4512, so the credit lands there, and its parts and sublet cost becomes 315.50.

What does a correction from documents look like?

At month end, repair order 4620 shows 477.00 of parts cost. The old starter is still under a bench, so its core charge is open, and credit memo 5611 for a wrong caliper was recorded without a repair order.

The 135.00 reduction is the two credits, 60.00 and 75.00, and each comes from a supplier document naming the original invoice, not from an adjustment. Had the supplier rejected the core, the 60.00 would stay, with the rejection notice as the document behind it.

How do you reconcile the supplier's statement and check the month?

AccountingTools describes a statement of account as listing the invoice number, invoice date and total amount of each invoice issued in the period, and the credit number, credit date and total amount of each credit. Each month, check every invoice and credit line on each parts supplier's statement against your own file. General matching of invoices to purchase orders and receiving records is a separate question.

Then check the month as a whole. Every invoice and credit on the statements, net, should sit in one of these places: repair orders, stock, shop supplies, unassigned parts cost, disputed bills, supplier-wide credits, or the exception list. An amount in none of them is the gap in the mapping.

The accounting basis changes timing, not the tie. AccountingTools describes the accrual basis as recording revenues when earned and expenses when incurred, regardless of when cash is received or paid. On that basis, list at month end every part received and charged to a repair order whose invoice has not come. Whether accrual-basis books record such a part before its invoice arrives is an open question to settle with whoever prepares the shop's tax return. Where the books carry listed parts, the month's parts purchases in the books equal the invoices and credits received, plus this month's list, less last month's list; where the books wait for the invoice, they equal the invoices and credits received, and the list is kept beside them. Open cores and returns are credits still to come. On the cash basis, which the same article describes as recording expenses only when cash is actually paid, the books carry only what has been paid, so run the month's check from the supplier documents and expect the books to differ by whatever is not yet paid. On either basis, each invoice and credit reaches the books once.

How do the shop management system and the books stay in agreement?

When repair orders live in a shop management system and supplier bills in the accounting records, each is complete for its own purpose and neither alone is complete for job cost. Name one authority for each question: the shop management system for parts cost per repair order, because the repair order lines are kept there, provided every issue slip and open-core entry is recorded against the repair order in it, and the books for the shop's total parts cost and what it owes suppliers.

Check your own system's documentation for what it sends to the books: closed repair orders, sales, parts cost, supplier invoices, or some of these. Parts cost must reach the books once, from the supplier bills or from closed repair orders, never from both. If your system records supplier invoices, compare each month the supplier invoices and credits entered in the shop system with those in the books, number by number, and explain any difference between the two systems' parts cost totals by items found in the statement check. If it does not, compare each closed repair order's parts lines with the supplier invoices, issue slips and credits filed with it. Correct whichever side the document shows is wrong; never adjust one system to match the other without finding the document.

How do you keep the documents behind a closed repair order findable?

File every parts document with the repair order it serves: supplier invoices or counter tickets, issue slips, open-core entries with their credit memos or rejection notices, return slips, return-to-stock slips and sublet invoices. Where one supplier invoice serves several repair orders, file it once by invoice number and record that number on each repair order. Scanned copies can be filed the same way, indexed by repair order number and by supplier invoice number. A warranty question, a customer dispute or a later review then becomes a lookup.

The IRS's page on what records to keep treats purchases as the items you buy and resell to customers, which is what parts on a repair order are. It says supporting documents for purchases should identify the payee, the amount paid, proof of payment, the date incurred, and include a description showing the amount was for purchases, and that a combination of documents may be needed to substantiate all of these. The same page says to keep records in an orderly fashion and in a safe place, and that all requirements that apply to hard copy books and records also apply to electronic records. How long to keep them is a separate question.

What happens to a parts document that names no repair order?

A parts document that names no repair order and is not marked for stock or shop supplies goes on an exception list the day it arrives, with the supplier, document number, date, amount and parts. The person who orders parts, usually the service writer or parts manager, works the list daily against open and recently closed repair orders by part number, vehicle and order date. Do not assign an exception to a repair order whose matching part already has an issue slip. The owner or manager reviews what is left each week, and at month end decides where each remaining item goes.

An unassigned amount that grows from month to month means capture at the parts counter is failing.