Overview
When managing Warranty repair services in Identifix, there are a number of approaches you may wish to take. This document will focus on two main approaches:
- Zero Billing
- Payment Offset
This document will also provide a best practices overview of Warranty Parts returns to the vendor and the use of the Identifix reporting tools to provide reporting insights for such services.
Zero Billing Option
For some shops, providing a zero cost service on the RO to facilitate Warranty repairs is a sufficient method to manage these types of services. To manage Warranty repairs on a RO with zero billing, The program recommends the following.
1. Create a zero dollar labor rate called “Warranty” from your Shop Settings under RO Info by clicking your User icon → Shop Settings → RO Info → New Labor Rate
This will allow for Technician tracking of assigned billed hours like any service while showing a zero dollar labor amount to your customer.
2. Create a ‘Warranty’ category so you can leverage the Category Reports.
- We recommend you set the ‘Require Category on every service’ flag but that’s optional.
- Navigate to your User icon → Account Settings → Categories
3. Create an RO and add the applicable service - Add ‘Warranty’ to the beginning of the service if you’d like.
4. Apply the ‘Warranty’ labor rate to the Warranty Service on the RO by selecting the ‘View financials’ option from the three dots menu in the lower right corner of the service.
While you're in the Financials section of that service, we recommend you categorize the service as 'Warranty'
5. If Warranty parts are used on the RO, zero out the Cost and Quoted price as applicable
- Click the part name in the RO to bring up the Part Update modal, zero out the cost and list prices, and click Update Part
- Note this updates the Part information on this RO only. It does not update the cost/list information of the Part in your inventory.
6. Set all line items to be Tax Exempt (if applicable)
- Click the three dots menu next to the Part or the Labor line and choose 'Do not tax'
- Once completed you will see an icon that represents the item as NOT taxed
7. You have now created a Warranty service using the Zero Billing option.
*Please note you can also create a Canned Job titled ‘Warranty Repairs’, saving the Canned Job with the appropriate labor rate, category, and marking it applicable for all cars. Click the ‘+Service’ button to build a service from scratch, then the three dots to ‘save as a canned job’ and make the updates.
Payment Offset Option
Some Shops require a more comprehensive method to manage Warranty repairs and prefer to show their customers the actual potential cost of such repairs. The following instructions will help to illustrate how this can be accomplished in Identifix.
1. Start by creating a Payment Type called “Warranty” from your User Icon → Shop Settings → Accounting. This payment type can be mapped to an expense category in your supported accounting solution labeled “Warranty cost” or something similar. We recommend working with your Accountant to setup the GL accordingly.
2. Create an RO and add a Warranty repair as you would any other standard repair at your regular retail rate.
Here’s an example of a brake concern with inspection and repairs.
Let’s look at the Financials overview of this example. To see the RO Financials click on the blue wrench at the top, and select View Financials.
Financials overview before changes. Note Total GP%, Parts GP%, and Total bill.
3. Set all parts and labor to non-taxable for the Warranty Service line items.
- See Step 6 from the ‘Zero Billing’ option above (here’s the example again)
- Most localities do not require sales tax on Warranty repairs. Check with your local agencies and use this recommendation if this applies to you.
4. Reprice all parts that will be covered by vendor part Warranty and full credit given. All parts that will not be covered by a vendor Warranty should not be changed. In this example the Brake cleaner, Brake Lube and Brake Fluid still have their normal cost.
Click the part name and then zero the cost in the Edit Part modal.
5. Let’s review the Financials after the changes. Note Total GP%, Parts GP% and Parts cost reflect non-Warranty reimbursable items only.
Parts Pricing Notes
Although the above mentioned strategy is preferred, it affects gross profit reporting for parts in an artificially positive way. This tactic can also affect the GP optimizer strategy (if enabled) as it will see this as profit and attempt to correct future pricing recommendations for the increased margin made available on the parts on this Warranty service. However, this method most closely approximates your loss due to the Warranty service without skewing your numbers significantly.
An alternative option in managing parts cost is to leave the parts cost and list price alone and bill at standard Cost and Quoted price for the line item. This option will increase your actual cost of goods sold, however. Your true cost for the parts that the vendor is warranting is $0 yet the cost entered is the original purchase cost.
In both options your actual cost to the vendor is $0 and when ordered, received and returned the vendor net balance is $0. The sales reports will show a cost of goods sold in the first option of $0, the second option will show the actual cost of the part which is not the same as the purchased amount.
While both options are viable and have disparate effects on the reporting data, the first option has the least impact on your numbers. In example shops that realize ~$2.0M per year in revenue and have Warranty charges of $11K, the Warranty percentage works out to be .55 to .64% of total sales. The change in overall parts margin over the year is less than 2 tenths of 1% while using this method, which is negligible.
6. Post payment to the Warranty payment type and add a note for tracking.
If a Warranty job is also covered by a labor claim from a vendor, nothing changes with the steps that have been outlined. The final step when the check/credit arrives from the vendor is to post the payment as a credit in the Warranty expense account in the Accounting Solution. This payment now reduces your Warranty expenses and is also tracked correctly.
Returning Warranty Exchange Parts
To return the Warranty parts for credit, you must go to the inventory and increase their quantity on hand by a sufficient amount to facilitate the necessary return for each part that you are sending back for Warranty credit.
Reporting
Whether you choose to use a Zero Billing or Payment Offset strategy (or combination of both) Identifix’s overall recommendation is to use Service categories to classify Warranty Services, as these insights can be referenced both in Service Details report exports and also in the Category Report Summary tab, both found on the reports branch.
To get insights directly related to Payment Offset method, you will run a Customer Payments report and filter this export by your chosen Warranty payment method.
The methods outlined above represent best practices for handling Warranty work in Identifix. By leveraging one of these or a combination of both you'll be able to quickly handle Warranty repairs and ensure you have proper tracking.