Repair Order aging is becoming a MAJOR problem and for most dealers it is not going to end well!
In every Spader Business Management 20 Group meeting I have had this year, I’ve pointed out how the aged RO count is steadily building. In our composite, we track the number of open ROs, and also those at 30 days and 90 days old. The number of open repair orders is usually enough to scare me, and then when you see 50% of them or more are 90+ days old, you know someone is going to feel some serious pain.
I don’t have the data to back it up, but years ago I took a service class, and was told that once an RO gets to that 90 day mark, the chances of collecting payment on it are less than 15%. Personally, I think 15% is optimistic. Earlier this year I came across my first dealer with more than 1000 open ROs, some going back 4 years. My rough math put the write-off at between $350,000 and $400,000 dollars. Seems like it’s a big enough number for ownership to pay attention to…..
Dealers often ask me what an acceptable number is. The reality is that there isn’t an acceptable number. That math needs to be replaced with a process. At least once a month, and preferably every two weeks, the owner/GM needs to sit down with the service manager and one by one go through every RO that is more than 30 days old.
- If the part is on backorder then go on a scavenger hunt
- If the customer took the machine, give them one last chance to bring it back for the repair
- If it’s warranty then get it cashiered
- If it’s policy then take the hit
- If the customer won’t come pick it up, file a mechanic’s lien and auction it off
- If it’s a problem child and the techs are procrastinating, then assign more talent to it
- If the OEM is dragging their feet on assisting, then remind the customer to file a lemon law claim
There should be a valid reason why every RO is open, and the team should be working every avenue to get them closed out. The bigger that list is, the harder it is to get it back under control, and the bigger the write-off will be.
Repair orders can also become stealth AR accounts, where employees park parts and make payments. I’ve also found a lot of theft and deceit buried in open RO lists.
And this is just my personal stance, but I prefer to disable the function in Lightspeed DMS that allows the dealer to cashier a part of a claim, and move the unfinished work to a new RO. This becomes a hamster wheel that spins up at the end of each month, and once you start it’s tough to stop. It’s a waste of time, and clouds the real status of the open RO list.
Lightspeed offers a great suite of reporting tools. When is the last time you sat down with your service manager to review the open RO list?
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