Question

A small garage business employs the following activities:

Supplying and mounting of draw-hooks for caravans.

Supplying and mounting of fog-lamps.

Supplying and mounting of sunshine roofs.

Repairing of bodywork damage.

Besides the garage proprietor, there are five mechanics who can perform all occurring tasks. The required parts are kept in stock.

In the last years, profits have been declining.The garage proprietor thinks that this is mainly caused by some severe control problems within the firm. These problems include:

When a customer brings in a car for a repair or a mounting job, an estimation of the costs is provided. Often, the actual price exceeds the offered price.

When a customer brings in a car for a repair or a mounting job, an estimation of the term of delivery is made. Often, the term of delivery is exceeded.

Most clients pay by bank transfer. For that purpose, an invoice should be sent to them few days after the job has been finished. Often, the invoice is not made or sent to the client.

Required

Give an explanation of the causes of the mentioned problems.

What measures would you take to solve these problems?

How would you apply a personal computer as a means to regain control over the business?

Answer 1

There is likely to be following reasons:

• Laxity on the part of mechanics in estimating the cost and delivery
• Lack of control to ensure that invoices are sent on time
• Possibility of fraud by some mechanic who intentionally quote lower price to some customers. It is also possibility that invoices are not sent intentionally

1. Proper record keeping by using a personal computer can help in control over business.

2. In addition, there should be segregation of duties .The person who prepares the estimate should not perform the repair of the same job. A separate person should be responsible for sending the invoices , who should not be involved in preparing the estimate

3. The proprietor should check the variance between estimated and actualcosts and analyze the reasons for the variance

4. There should be regular check by the proprietorto ensure all invoices are dispatched and the amount is paid

5. Monthly Bank Reconciliation should be carried out