Please advice me - do you know about an internal billing system. I mean the billing system that must be used between Sales Department and Service Department in any company that sells industrial equipment. Standard situation - service department does any job (predelivery inspection, load/unload of containers with new equipment and so on) for other department, technicians spend the working time and this time has not being counted. The most important target for all "active" (not accounting department or drivers team) departments is to earn money. But how may this working time be counted. How does one department invoice to other inside of the same company? Does anybody know the clear billing system ? How it is in your company? Does anybody know any standard concerning above mentioned matter?
Best regards,
Alexander.
P.S. This system is very sore point for my company.
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In the company im with, the spare parts department charges the service department at cost + agreed rate. However we are finding that this lowers our competitiveness pricing wise when compared to our competitors. See if the spare part dept makes a profit, the Service dept will charge the customer a higher price so that they too make a profit. This is a problem that we are now trying to solve, as both the depts. do not want to reduce their individual profits.
We always treated it as a customer for p and l purposes. The only difference was we set an internal labor and parts rate at lower margins. This makes sales, rentals etc look at the cost involved when they "request" work as well as keeps the department doing the work from appearing unproductive on paper. It is simply money from one pocket to another but to manage the dealership properly it must be done.
we use a work order and invoice each machine for the work we did to it and track it. All parts and labour at the going rate. No cheap internals. This way each department is responsible for the costs it incurrs. Works great. Thanks to the guy who taught us that.
If these are occasional discrete activities, using a work order is probably your best bet.
If these activities are a more consistent part of day-to-day operations you may just want to agree upon a fixed number of labor hours (and possibly overhead) to assign to the other department each week or month.
Had thsi problem many years ago. Whenever anyone asks you to do something. ask them for an internal order ort work instruction. YOur technicians should complete a worksheet for this work and this should be charged internally at whatever rate the company agrees. Stop being a charity!
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