THE BUDGET SYSTEM AS AN AID TO SERVICE-STATION MANAGEMENT 250025

Successful operation of a general service-station depends upon the application of several business fundamentals. The service division of a car sales organization can be made to produce a fair profit by following proper methods, but the importance of the service division as a possible asset or liability has only recently begun to be recognized by the more progressive sales companies; surprisingly few service-station operators or managers have attempted to study the condition and to correct faults and increase the efficiency of their shops, while fewer still have any definite control-records for their guidance. Too many organizations try to conduct their service divisions with little or no attempt to follow the business principles that are observed by the foremost corporations in many lines of industry, with the inevitable result that the monthly balance sheets of the service-stations vary from a heavy loss to a fortunate profit.

The author regards 8 per cent as a fair profit, realizing that the main source of profit of a distributer or dealer is the sale of new vehicles and that, as good service helps to increase such sales, any income from the service division, above its expenses and in excess of a fair profit, should be used to develop better service or to reduce certain costs of service to the car-owners. Successful distributers and dealers are careful to employ, as managers of their service-stations, experienced business executives who can direct men and who also have some knowledge of shop practice. They put business training first in importance and mechanical knowledge second, thus reversing the practice of the past. The main requirements of good service are cleanliness in and about the premises; prompt, courteous and friendly reception and treatment of customers; definite promises of delivery dates made and kept; prompt, careful and correct workmanship; standardized prices; correct billing; and avoidance of disputes.

Application of the budget system to the business is advocated as a sure means of conducting it on a sound basis. The budget determines as nearly as possible, after consideration of all factors, including the previous year's business, the volume of income that should be expected for the current year and apportions it by months. It fixes the profit desired and the balance of income that can be allowed for all items of expense. It sets a goal to be reached and establishes a definite basis for the guidance of the management.

The method of preparing a budget is explained in detail and tables for a budget of $36,000 for 1 year are given. In one table the major items of income, gross cost of doing business and gross and net profit are apportioned by months throughout the year. Similarly, all items of direct expense, from which no revenue is derived, are listed and allocated by months in the same proportions as the income. By adhering to such a table, the expenses are kept in balance with the income month by month. In making up a budget, the desired net profit should be deducted from income before deducting the total direct expense of conducting the business, in the opinion of the author, thereby placing a greater check on expenditures and more nearly ensuring the profitable management of the business. Various items of direct expense are explained.

Methods of control for adhering closely to the budget day by day throughout the year are described and illustrated with charts. They involve the centering of authority for all expenditures in some one individual and the keeping of records of all items of expense for each shop in the service division, of all idle time, all billing for service rendered, all productive hours of work, and a register of car-owners that shows the frequency and kinds of work rendered for each customer. Such records present a current picture of the progress of the business with relation to the budget and to the previous year or years and are essential for the information and guidance of the service manager. Keeping and posting such records is delegated to a stenographer and does not require altogether an average of more than 2 hr. of her time per day.