5 Reasons Why Cash Flow is Important to a Bodyshop

The UK automotive repair industry is complex, with a myriad of pressures, facets, and parties involved. At the front line of this sector sit Bodyshops, and they are the ones responsible for getting vehicles safely back on the road, but they face a range of challenges, and high on that list is cash flow.

Cash flow is key in determining a Bodyshop’s capacity/ability to repair cars efficiently and get them back into a safe running order as quickly as possible. This blog will examine the top five reasons why cash flow is important for bodyshops and how owners and managers can overcome them.

1. Operational Stability

Having a constant and steady cash flow into your Bodyshop ensures that owners can easily cover their day-to-day operational expenses such as utilities, payroll, and suppliers – giving the business a stable base on which to operate.

However, for some bodyshops, this sounds like an unachievable utopia. Considering that one of the main revenue streams for bodyshops are insurer- and network-approved repairs. Although they can be an essential source of revenue, with lengthy payment terms in place, bodyshops can be left waiting 30 + days to receive payment – making it a difficult and time-consuming task to balance the books and track money coming back into the business.

2. Inventory Management

Parts availability is an issue across the sector and was one of the top 5 concerns for bodyshops in ABP Club’s 2024 UK Body Repair Industry Yearbook. Although having sufficient cash flow can’t completely resolve the issue, it can help reduce these financial pressures.

During and post-pandemic, many parts suppliers withdrew account facilities, meaning bodyshops were forced to pay for parts up front. Having ready funds available is a luxury for small to medium businesses, resulting in many opting to use credit cards and loans to purchase – incurring more expense. Having steady, reliable cash flow means Bodyshops can drawdown their own funds for parts and inventory.

3. Investment in Technology

The car of today is overloaded with technology. From ADAS to EV and Hybrid, all of this impacts the bottom line and the need for funds to invest in training and equipment to keep up with the pace of the industry and to deliver an improved service to customers.

Consider a simple wing mirror. Traditionally, this could roughly cost £30. With zero tech and simple fixtures, it was an inexpensive part of the repair. However, modern wing mirrors can cost upwards of £700 because of built-in sensors and heaters, etc., putting stress on the need to have the funds to purchase, and train technicians to be able to fit and calibrate as part of the repair process.

4. Handling Unexpected Expenses

If you’d asked anyone in March 2019 that one year later, the world would be in total lockdown due to a global pandemic, they would have laughed you in the face. However, unforeseen road blocks, expenses, legal fees, or a sudden drop in repair volumes can all be overcome by having positive cash flow – reducing risk and securing a future for the business.

5. Bodyshop Growth & Expansion

It’s no surprise that cash flow plays an integral part in the growth and expansion of a Bodyshop’s operations, allowing it to develop multiple sites, hire new talent, and expand its services into additional revenue streams.

However, to realise, plan and secure not only requires the financial support of cash flow but also the time to strategise, which is often a rarity as well for Bodyshop owners.

Conclusion

What these five reasons highlight is the significance for bodyshop owners to prioritise the management of their cash flow, as it will unlock more time for them to focus on expanding operations, avoid relying on costly debt, reduce risk, and build healthy working capital for investments in training and technology.

There are a growing number of bodyshop owners utilising the invoice funding from ACG to support their cash flow efficiencies, fuelling growth and better business operations. ACG offers invoice funding services that ensure payment to bodyshops within 24 hours, aiding cash flow efficiencies.

“The impact ACG has had on our cash flow has been incredible! Our cash flow has never been in such a strong position, enabling us to run the business effectively and develop long-term strategies for growth.”, Commented Phil Merritt Smart Car UK Managing Director, in a recent ACG case study.

To read more about ACG’s customer success stories and how they can support your Bodyshop’s cash flow, head over to ACG’s Case Study Library.