Shop owners should aim to build a reserve fund that can last for six months. For some shops, especially those on lower budgets and with minimal manpower, figuring out how to start saving can be a project unto itself.
By Suz Baldwin and Robby Gilbert

You have undoubtedly heard of a rainy-day fund. Maybe you have heard it called a different name—“shop savings” is a good one; so is “emergency fund”. Whatever you call it, the meaning remains the same. It is a sort of financial reserve for your shop to dip into on those (hopefully) rare occasions when you need fast cash.

Over the years, we have heard lots of reasons why shops might need some quick money. Let’s say an important piece of equipment goes on the fritz, requiring you to shell out for expensive repairs or an entirely new piece of gear. Or maybe your shop is facing a natural disaster like an earthquake or blizzard that a) forces you to stop all work, and b) leaves you with significant damage to repair.

In the end, it does not matter why you need some savings squirreled away. The point is you need them. You probably know it. However, for some shops, especially those on lower budgets and with minimal manpower, figuring out how to start saving can be a project unto itself.

What Kind of Savings Should You Have?
Shop owners should aim to build a reserve fund that can last for six months. We know not everyone is going to be able to do that. We also know it is not going to happen right away. Six months is something to aim for, but if you can only build toward one month, then build toward one month. This is your emergency fund. It may be the thing that keeps the lights on if something bad happens.

It will also give you the peace of mind to make important decisions without the threat of looming financial disaster perched on your shoulder. You never make a decision in desperation if you have six months worth of cash sitting there.

The Two Pressures on Shop Owners
Before going any further, let’s make sure we understand the forces at work here, and how they can throw a wrench into your efforts to build up a healthy cash fund. The two pressures of cash flow that fight against business owners are your vendors, who want to get paid ASAP, and your customers, who want to pay you as late as they can. When you send an invoice, they want to hold onto their cash. These two sides can come into conflict.

Here’s an example. You buy an engine for a customer. The engine’s manufacturer gives you a 10-day credit. You put in the engine; you pay that $8,000 bill to the vendor. Your customer still has 30 days to pay you, which leaves you with 20 days without that $8,000. That is how many shops usually operate and, over time, that does not leave a lot of room to build up any savings. What money you do get after a customer pays up usually goes straight to your vendors. Your job, then, is to try to get around these pressures (or even better: reverse them).

How to Build a Shop Savings Fund
#1: Create a Budget and Stick to It
You will not be able to save much of anything if you cannot accurately track (and trim) your expenses, so get that budget going if you have not already. Once you have your finances planned out, you can see areas where you can trim.

#2: Switch to Electronic
If you are still on pen and paper accounting, you are giving your customers more time to pay you and putting an additional drain on your accounts. Once you get an invoice to your actual accounting department, it will be a good seven days after service that the bill is sent out. Figure up to two or three days in transit. That is 40 days post-service before your customer will even think about paying. Switching to software-based invoicing allows you to invoice your customers right away, giving them the opportunity to pay up sooner rather than later.

#3: Look into Customer History
Always look at your customers’ invoicing history before getting started on any service. You might be surprised to find out they owe you some money already. Often, a shop will jump right into work when a regular customer brings their vehicle in. After all, they are bound to pay eventually, right? They probably will, particularly if they are a steady customer. But now is the time to remind them that they need to get the ball rolling. If a customer is $10,000 past due, and they bring in another truck for another $10,000, let them know that they need to pay on the prior invoice before you get started on the next one.

#4: Be Cautious When Extending Credit
Some shops have extended credit to repeat customers with great success. However, be careful with these offerings, particularly when you are trying to build up some savings. Think about it: Would you be okay giving this person or company $30,000 worth of work that will likely not be paid up anytime soon?

#5: Make Sure You Are Marking Up Parts and Supplies
We talk about this a lot, but it bears repeating: make sure you are marking up your shop supplies and every part you sell. Those paper towels add up pretty quickly and so do those glow plugs. When you start charging for parts correctly, you may wind up with thousands of dollars you were previously just giving away.

#6: Turn to Labor Guides
To increase your revenue, give your techs the opportunity to be more efficient. Working with labor guides lets you put a time on how long maintenance or repairs will take. If takes two hours, but your tech gets it done in one, you still get to bill those two hours while assigning the tech to another job. You know what they say about slow and steady winning the race? Slow and steady also helps build the savings account.

We have talked about trimming expenses and being more efficient, but one word of warning: Do not cut any costs that drive revenue. In layman’s terms, do not go around firing people just to save a buck. Getting rid of a tech that costs you $70,000 a year is also going to cut the $130 to $170,000 of revenue the tech brings in. Sure, it might be a momentary financial relief, but it is going to hurt later.

#7: Increase Your Shop Revenue
Instead of letting people go to save money, give your employees the tools they need to increase the revenue they drive. We mentioned using labor guides already. But did you know your service managers can help drive revenue? Your technicians can, too. You do not have to stop there, though. Can you offer additional service by subletting? What about offering emergency repair, if you do not already? There are many ways you, a shop owner or manager, can increase your revenue without putting your employees on the chopping block.

Remember, start slow and work your way toward it. You will not build up six months of savings overnight, but you will start socking away some cash, and having some money in your back pocket can really save your operation if things go south. Or, you know, if it starts to rain. | WA

Suz Baldwin got her start in the automotive industry, writing and editing for several motorcycle and classic car magazines straight out of college. In the years that followed, she has written all sorts of copy for brands big and small.

Robby Gilbert is a CPA and began his career with Deloitte working with their Audit and Assurance group. He joined Fullbay as Controller in May 2019 and is now Fullbay’s Director of Finance.
This article originally appeared on Fullbay’s blog at
Fullbay is a heavy-duty repair shop management platform that enables shops to receive repair requests, invoice customers and everything in between. For more information, visit