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

Causes for the mentioned problems:

1.Lack of internal control policy regarding invoice issue.

2.Improper costing estimates and debtor collection system

3.Irregularity in delievery system.

Measures to solve the problems:

Problem	Measure
Lack of internal control policy regarding invoice issue	Draft policy that ensures proper invoicing at the time of providing service to the customer
Improper costing estimates and debtor collection	Prepare a cost statement which clearly indicates what are the probable cost to be incurred both fixed and variable. Consider the normal & abnormal losses if any that will occur. Mention the due dates of payment for maintaining track of debtors.
Irregularity in delievery system	Consider what type of repair service is to be provided to a client, draft a delievery estimate for different type of service depending upon the amount of time to be spent on that particular service. Add one grace day to the estimated time taken and then communicate the same to the customer.

Personal Computer as a means to regain control over the business:

Use Accounting softwares to maintain system of invoice issue and collection.

Use spreadsheet to prepare client data and delievery schedule.