Auto repair accounting that separates parts margin from labor.
Parts vs labor margin, technician pay (flat-rate or hourly), warranty work, and the inventory accounting that keeps a busy shop solvent. Built for Denver-area independent shops.
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Auto repair has one of the most distinctive accounting profiles of any small business. Parts revenue and labor revenue carry very different margins (parts: 30–45%, labor: 60–80%). Technician pay structures range from straight hourly to flat-rate to hybrid efficiency-based comp. Warranty work has to be tracked separately or it tanks margin reporting. Inventory of common parts (oil, filters, fluids, tires, brake pads) is non-trivial. Mix it all together in a generic chart of accounts and the P&L tells you nothing useful.
We work with general repair shops, transmission specialists, body shops, tire shops, and quick-lube. The chart of accounts and reporting framework adjusts to your shop type but the bones are consistent.
What we handle for auto repair shops
- Parts vs labor revenue separation — different margins, different KPIs, different pricing levers.
- Technician pay — flat-rate (book hours), hourly, or efficiency-based comp run correctly through payroll.
- Inventory tracking for parts, oil, fluids, tires, with periodic or perpetual inventory accounting.
- Warranty work tracking — separated from billable work so warranty cost does not distort the margin on paid jobs.
- Sublet and outside repair — pass-through cost separated from in-house labor.
- Sales tax on parts (taxable) vs labor (not taxable in CO) handled correctly per ticket.
- Equipment and lift depreciation with Section 179 timing.
Software we work in for auto repair
- Mitchell 1, ShopWare, Tekmetric, AutoFluent — shop management systems we reconcile into QuickBooks Online.
- QuickBooks Online + Time — for shops not yet on a dedicated SMS platform.
- Gusto Payroll — handles flat-rate technician pay correctly when configured properly.
Pricing
| Shop size | Monthly fee |
|---|---|
| Owner + 1–2 techs | $500 – $750 |
| 3–6 bays / techs | $750 – $1,400 |
| Multi-bay / multi-location | $1,400 – $3,000 |
A general repair shop was running 8% of total labor hours on warranty work — coming back free of charge. That cost was buried in regular labor expense, making their billable-job margin look 6 points worse than it actually was. Once we separated warranty cost into its own line, the owner could finally see which type of work was profitable and adjust diagnostic procedures to reduce the warranty rate.
If you do not separate parts revenue from labor revenue, your margin reporting is meaningless.
If you carry meaningful inventory (more than $5K in parts on the shelf), monthly inventory adjustments belong in your close.
If your warranty/comeback rate is above 5% of labor hours, track it separately so you can manage it down.
Real margin per ticket, real productivity per tech, real inventory accounting.
From $500/month for a small shop. Built for the way independent auto repair actually books revenue.
Frequently asked questions
How do I track parts vs labor margin?
We code parts revenue, parts cost, labor revenue, and labor cost as separate accounts in your chart of accounts. Each month you see both as separate margin lines. Industry benchmark: parts margin 30–45%, labor margin 60–80%. If yours is off, we drill into why.
How do you handle flat-rate technician pay?
Flat-rate pay is gross wages × book hours, regardless of clock hours. We configure Gusto or QuickBooks Payroll to track both and run flat-rate correctly under FLSA fluctuating-workweek rules. Overtime calculation is non-obvious for flat-rate techs — we get it right.
Do I charge sales tax on labor?
In Colorado, repair labor is generally not taxable at the state level if separately stated on the invoice. Parts are taxable. If labor and parts are bundled, the entire amount may be taxable. We set up your shop management system to itemize correctly.
How do you handle inventory?
For shops carrying under ~$10K in parts, periodic inventory (count quarterly) is usually sufficient. For larger inventories or shops carrying high-value parts (transmissions, engines), we set up perpetual inventory tracking through the SMS platform.
What about sublet repairs?
Sublet costs (work sent to another shop or specialist) are pass-through. We code them to a sublet expense line offset by sublet revenue billed to the customer. Net effect: zero impact on shop margin, full visibility on volume.