Different Types Of Service Repair Order Payments

Types Of Service Repair Order Payments

There are 3 main categories of repair orders and are defined by their payment types: “Customer” pay, “Warranty” pay, and “Internal” pay.

Sometimes it helps to know how these invoices will be paid once the repairs are completed before you finalize and close the repair order. These are a few examples of how invoices can be paid and which of the 3 main repair orders they fall into.

1. Customer Pay (CP)

• The customer pays the repair shop directly
• The customer’s employer pays the repair shop
• The customer fleet maintenance pays for the repair
• The customer has a receivables account and pays after 30 days

2. Warranty Pay (WP)

• Factory warranty
• Factory recall & campaign
• Extended & aftermarket
• Goodwill – paid by the manufacturer

3. Internal Pay (IP)

• Used car reconditioning
• Pre-delivery inspections (PDI)
• Comeback repair
• Goodwill – paid by the shop

All invoices are created as CP during the initial write-up. The pay type can only be changed after the technician diagnoses the repair and you have confirmed the customer’s warranty is still valid.

Don’t worry if you discover a customer pay invoice should have been warranty. You can move them to the correct payment type later.

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Customer Pay (CP) Repair Orders

The most common types of repairs on customer pay repair orders:

• Regular maintenance and service repairs
• Additional upgrades such as vehicle accessories
• Repairs not covered by warranty such as damage or misuse
• Miscellaneous repairs not covered by warranty

“Customer Pay” service invoices can also include:

• Repairs paid by third-parties such as fleet management and financial lenders
• Deductibles for extended service contracts or insurance claims

After wrapping up the sales consultation, customers must always acknowledge and agree to the following details on customer pay invoices before you can proceed any further.

A few service advisors skip over this step then find themselves in hot water later in the day. So, get into the habit of reviewing the following details with every customer and at every sale. You will learn in greater detail about these guidelines in later lessons.

Confirm the customer understands the scope of repairs you have reviewed, and they agree to the following:

• Review all repair job-lines on the repair order
• The price given to the customer is the total repair cost
• Discussed additional service charges or applicable diagnostic fees

You’ll also ask customers how they will pay for repairs not covered by warranty:

Will they pay immediately after the repair?

Do they have a charge account at the store?

Are they a member of a fleet company?

Is it a company vehicle, and how will their employer pay?

How they respond to these questions will reflect on how to proceed next with the repair order.

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Accounts Receivables (A/R) Repair Orders

Some customers will have a pre-approved receivable’s account at the repair shop or dealership. Customers will have a maximum chargeable limit based on their credit score and average spending needs.

These accounts are generally set up through the accounting department after the customer completes a credit application. Some software systems will display a customer as having an A/R account, the account balance, and the remaining credit available. For further clarification, consult the accounting staff or service manager.

Here is a list of customer and third-party service companies that may have a charge account:

• Local business
• Extended warranty, and aftermarket warranty
• Fleet maintenance cardholders
• Financial lending companies
• Insurance companies

Check the following in advance to see if you require additional information from the customer, the accounting department, or the from the company paying the invoice before starting any repairs:

• Is their account in good standing or in arrears?
• What is the available credit balance remaining?
• Is a purchase order (PO) required?
• Are you speaking with the driver, or is this person the car jockey?
• Who can authorize repairs for the vehicle?
• Does the plate number of the vehicle match your DMS and service contract?
• Is their employer aware of the repairs?
• Do you require further authorization from another person or company?
• Do you have an accurate estimate?
• Does their employer require the invoice mailed, emailed, or faxed?
• Is there a payables department and a contact person?

It only takes a few extra minutes to review these questions with customers. Alternatively, with repeat customers, you can look back at their service history. It will tell to see how they paid and, if applicable, additional contact information.

Shop Tip:

• All invoices start as customer pay (except recalls and campaigns)
• Review each repair with your customer
• Ensure they are aware of the full cost
• They may be liable for the cost of additional repairs

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Fleet Maintenance Contract Procedures

Businesses operating a sizable fleet of vehicles may employ a third-party management company to control their costs and ensure their vehicles are properly maintained. Fleet companies do not pay full price, and they will discount the hourly door rate and parts cost. These discounts are set ahead of time with the service manager and should not affect you directly. Fleet companies still need to bill the customer and use the discount earned from your shop as an administration fee when they bill the customer.

Dealing with fleet customers is not a difficult task. There are just a few extra steps advisors need to perform to ensure claims are paid promptly and without error.

Coverage Is Still Active

The first step is to confirm if the customer’s coverage is currently active, the driver and vehicle match according to the fleet maintenance information, and determine their card limit.

The Inspection

After the technician completes their inspection, they’ll provide you with an update on the necessary repairs by completing the cause and correction section of the repair order.

Contacting Fleet Companies

Next, prepare a detailed estimate and either call the fleet company or input the repair information in their online portal for authorization. Verify the cost of repairs and authorization limitations with the fleet maintenance company. Repairs can begin once authorization of coverage is confirmed.

Measurements & Wear

Fleet companies require accurate measurements of components such as tires, brake pad measurement, alignment specs. They track the life remaining on components for two reasons; to ensure the repair shop has not replaced these items prematurely, and they like to estimate the amount of time remaining on components before the vehicle is returned to the leasing company.

Final Authorization

When repairs are completed, you should verify all pricing is as you and your customer agreed to before finalizing the repair order. If applicable, ensure to document the measurements of old or replaced parts associated with the repair.

Contact the fleet company for final “closeout authorization” and close the invoice to the proper account. Fleet companies can and will decline any work that was done that does not meet all their criteria.

Shop Tip:

• Verify the customers account information
• Authorized the repairs authorized with the fleet company
• Proved wear measurements
• Finalize the repairs for payment

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Warranty Pay Repairs

There are three types of warranty paid claims: Factory, Extended, and Factory Recall.

A factory warranty is included with new car purchases. It’s to pay for malfunctioning parts or poor craftsmanship for a limited time or mileage. Factory warranties commonly include a basic limited warranty, powertrain, corrosion, and emissions.

All car manufacturers’ brands include a warranty on new cars. What is covered, and how long will differ between car brands, the vehicle model, and the year. In general, the core coverage is primarily the same.

Job-lines on repair orders should not be prewritten as a warranty repair. All customer concerns are written as customer pay initially until a technician verifies how the part malfunctioned. Repairs can be changed to “warranty” after it is confirmed.

If you are not sure about a repair, check with the service manager on how to proceed.

Important note: Service advisors should communicate the warranty coverage to customers with great care. Do not assume a warranty will cover the cost of repairs. Always educate your customer about the possibility they may be liable for all or a portion of the repair cost.

You may need to explain the warranty terms with them, such as malfunction versus wear and tear, improper maintenance, or mileage limit exceeding coverage. Don’t assume customers understand the terms of their warranty and what is covered.

The New Car Factory Warranty

• Base new car
• Powertrain warranty
• Emissions warranty
• Rust warranty

When a warranty company is paying for the repair, you will need to adhere to several policies to receive payment from the factory such as:

• Is the date of repair within the warranty’s specified time frame limits?
• Is the odometer reading less than the warranty’s maximum mileage/ kilometer?
• Does the contract VIN match the vehicle?
• Is the name on the warranty or extended service contract the same as the customer?
• Is the repair an item covered under this particular warranty?
• Could there have been an outside influence causing the failure?
• Disqualified warranty coverage, for example, damages caused by misuse, accident, or non-factory modifications to the vehicle.
• Does the contract specify a deductible?
• Are diagnostic charges covered by the warranty?
• Only after this information is verified and you have confirmation that warranty coverage is valid can the technician perform the repair.

 

Factory Recalls & Service Bulletin (Service Campaign)

Generally, manufacturers will initiate contact with customers directly if their car is affected by a factory recall or a service campaign, usually with a letter sent through the mail and/or email. The letter then prompts the customer to visit their local dealership to complete the repair.

Factory recalls and service bulletin repairs can either improve the product, system upgrades, or repair safety-related concerns. Both types are initiated and paid for by the manufacturer. Recalls and service bulletins are not the same things. What is the difference between the two types?

1. A factory recall means repairs must be completed regardless of the vehicle’s condition.
2. A service bulletin (sometimes called a campaign) means the repair is completed only if the problem currently exists with the vehicle (a technician will need to diagnose it first).

The following information must be verified in the manufacturers portal before you can schedule a service appointment for the customer:

• Does the make, model, year, and vehicle options match the parameters of the bulletin or recall?
• Does the customer have a recall notice?
• Have you confirmed through the manufacturer portal that the customer’s vehicle is affected?
• Has the recall already been completed by another repair facility?

Finally, if the customer’s car matches all the above criteria, you need to check with the parts department and ensure they have all the parts in stock before scheduling an appointment.

Once you have confirmed there is an outstanding factory recall or service bulletin on the vehicle, it’s okay to go ahead and create a repair order as warranty pay.

 

Extended Warranty, Third-Party Warranties & Insurers

Third-party warranty providers or extended service contracts are additional plans that extend some of the factory warranty coverage after it expires. Customers can purchase them from the manufacturer or a third-party insurer.

Who are third-party repair suppliers?

• Extended warranty
• Aftermarket warranty
• Insurance companies

Not all providers are the same. You will need to verify account details with the providers ahead of the repair.

Listed here are sample steps you can use to verify more information about the customer’s account:

• Confirm coverage either through their online portal or by phone
• Contact the service provider to verify the contract is still active and valid
• Get an authorization number from the provider before the technician starts repair
• Verify if there is a deductible, inform the customer of additional charges
• The service contract may have a maximum amount payable regardless of the actual cost (additional charges will need to be authorized by the customer)
• The provider may not pay the shop diagnostic fees (customer will have to pay)
• The provider may not pay the shops full labor rate (customer will have to pay)
• You will need to notify the customer if repairs are not covered by the service contract (the customer may decide not to proceed with the repair)
• They may request aftermarket or used parts installed to reduce the cost
• They may ask for the measurements of everyday wear items
• They may require an adjuster to review the fault before repairs can begin

Aftermarket warranty providers can be difficult to work with, be sure to ask them plenty of questions before allowing repairs to proceed. Ask the service manager to review the claim details with you if you feel uncertain about the repair.

Shop Tip:

• Factory recalls and service campaigns are written as a warranty repair
• Verify the details of the customer’s warranty contract details before starting repairs
• Let the customer know if they are required to pay out of pocket to cover additional fees
• Have the manager review the claim before starting repairs if you do not feel 100% positive about the policy coverage

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Other Repair Order Payment Types

Financial Lenders

Customers can use financial lenders to pay for car repairs. Financial lenders are like fleet companies since their authorization steps and information remains the same as fleet customers. You would still need to ensure the account is active, provide repair details, and obtain authorization.

The repair center you work for may use a specific financial lender, or the customer may seek assistance independently. Ensure you get familiar with the lending companies’ policy since they tend to be the worst to obtain repair authorization and the biggest nuisance when receiving payment.

Customer Deposits

You may need to ask customers to leave a deposit before starting repairs. Collecting a deposit is routine and protects the shop from incurring heavy losses. Each shop will have different policies in place; always check with the shop you are working with for more details. So, when does a shop ask their customer for a deposit?

These are just a few reasons:

• They are a new customer to the shop
• They do not perform routine maintenance or repairs at your shop
• Repair needs a special-order part
• Older vehicle and repairs may not fix the vehicle
• The amount exceeds a certain amount set by the shop

Never release a car to customers who have not paid for the repair in full. Speak with your manager for assistance or guidance.

Customer Deductibles

A few companies will require the customer to pay a deductible or a portion of the repair cost. So, in the beginning, it’s good practice to ask third-party companies if one is required. Ensure you inform the customer of the deductible amount before starting repairs.

You can expect to collect deductibles with the following companies:

• Extended warranty
• Aftermarket warranty
• Financial lenders
• Insurance companies

Deductibles are collected after completing all the repairs, and the invoice is finalized and printed.

Customer Goodwill

If the vehicle does not qualify under any existing warranty, but the technician or the customer feels the failure was premature and would like the factory to assist, there are procedures most shops are empowered to exercise.

There are parameters to work within when considering Goodwill:

• How far out of warranty is the vehicle?
• Do they regularly service the vehicle?
• Do they usually service at your repair facility or a franchised dealer?
• Determine customer loyalty. Is there more than one car in the family serviced at the shop? Does the customer service all their cars at the shop?
• Is the customer willing to pay for a portion of the repair?
• Do they have an extended service plan?
• Would this show of goodwill reinforce customer loyalty?

It’s up to the service manager to decide if the shop should repair a customer’s car through factory goodwill, or if the shop should absorb the repair cost. The manager will make this decision after the technician has diagnosed why the part failed.

Internal Pay Repairs

Internal invoices are charges not paid by customers or warranty could include:

• New or used vehicle clean up (at dealerships)
• Used car reconditioning (at dealerships)
• New car prep including pre-delivery inspections or PDI, accessories, aftermarket services such as tint or a remote start (at dealerships)
• Damage caused by the shop including lot damage, technician damage, repeat repairs (comebacks) due to incorrect diagnosis
• Complimentary services such as lube oil filter or car wash

All new cars from the factory require a pre-delivery inspection (also called PDI), which is considered an internal pay work order because the manufacturer reimburses the dealership for inspecting the car and topping up fluids.

Internal charges to be paid by new or used car departments at dealerships:

As with customer pay, or warranty pay repairs, the department responsible for the costs must be fully aware of the liability and give their authorization before any repairs are initiated.

In any of these payment methods, there needs to be a clear agreement with the party, who is expected to pay, and all details are confirmed before repairs can begin.

The department manager needs to give their approval for the scope of the work and agree to the amount. Advisors should record who approved the repair, including the time and date.

Lastly, request the department manager provide you with a purchase order, email, or manager signature as a backup to their approval.

Shop Tip:

• Check third parties if a customer deductible is necessary
• Check your shop’s policy guide if a deposit is required from customers
• Always have a manager approve internal or goodwill repairs
• Ensure everyone is aware of the final repair cost