Cash Flow Management for Repair Shop Owners

Cash flow kills more repair shops than lack of customers. The shop is busy, repairs are going out the door, and you still cannot make payroll. The problem is almost never revenue — it is the gap between when you spend money and when you collect it. This guide covers how to track, protect, and improve cash flow for a repair business.

Why Cash Flow Is Different From Profit

Profit is what your accountant calculates at the end of the year. Cash flow is whether you can pay your bills this Friday. You can be profitable on paper and still run out of cash.

Example: You buy $3,000 in parts this month, pay rent of $2,000, and make payroll of $4,500. That is $9,500 going out. You invoice $14,000 in completed repairs — but $4,000 of that is on Net-30 terms with contractor accounts and $2,000 is in uncollected invoices. You actually collected $8,000 this month. You are profitable but $1,500 short on cash.

This gap is where shops get into trouble.

Know Your Numbers

Fixed Monthly Costs

These do not change month to month. You need to know them exactly:

Variable Monthly Costs

These scale with your repair volume:

The Break-Even Number

Add your fixed and variable costs. That is your break-even point — the minimum you need to collect each month to keep the lights on.

For a one-technician shop: $8,000-12,000/month

For a two-technician shop: $15,000-22,000/month

If you do not know your break-even number, calculate it today. Everything else in this guide depends on it.

Revenue Targets and Margins

What Healthy Looks Like

A well-run independent repair shop targets these margins:

• Gross margin (revenue minus parts cost): 65-75%
• Net margin (after all expenses): 15-25%
• Labor cost ratio: 25-35% of revenue
• Parts cost ratio: 20-30% of revenue

If your net margin is below 10%, you are either underpricing, overstaffed, or carrying too much overhead. If it is above 25%, you are running a tight ship.

Revenue Per Technician

A productive technician should generate $8,000-15,000/month in repair revenue, depending on repair types and your pricing. If a technician is generating less than $8,000, investigate:

• Are they spending too much time on low-value repairs?
• Is the bench undersupplied with parts, causing wait time?
• Is the intake process sending them work too slowly?

Cash Flow Killers

Uncollected Invoices

This is the number one cash flow killer for repair shops. A customer picks up their tool, promises to pay next week, and disappears.

Fix it:

• Collect payment before releasing the tool. Always.
• Use text-to-pay so customers can pay before they even arrive for pickup.
• For B2B accounts on terms, invoice immediately and follow up at 15 days, not 30.

Parts Sitting on Shelves

Overstocking parts ties up cash. If you have $5,000 in parts inventory and $3,000 of it has not moved in 90 days, that is $3,000 in dead cash.

Fix it:

• Track parts usage by month. Only stock parts that move regularly.
• Order specialty parts after the customer approves the repair, not before.
• Set reorder points based on actual consumption, not gut feeling.

Seasonal Revenue Gaps

Small engine shops face a winter slowdown. Power tool shops slow down after construction season. If you do not plan for these gaps, you burn through your reserves.

Fix it:

• Build a 3-month cash reserve during your busy season. This is non-negotiable.
• Offer maintenance programs and winter specials to smooth revenue.
• Schedule major expenses (equipment purchases, shop improvements) during your high-revenue months.

Slow-Paying Contractors

B2B accounts on Net-30 terms can stretch to Net-60 or Net-90 if you do not enforce terms.

Fix it:

• Set credit limits. A new contractor starts at $500. Increase after they prove they pay on time.
• Send invoice reminders automatically at 15 and 25 days.
• Charge a late fee (1.5% per month is standard) and communicate it upfront.
• Cut off credit for accounts past 45 days. This feels uncomfortable but protects your business.

Weekly Cash Flow Check

Every Monday, spend 15 minutes reviewing:

1. Bank balance. Where are you right now?
2. Receivables. What is owed to you and when is it due?
3. Payables. What do you owe and when is it due?
4. Parts orders. What is on order and what will it cost?
5. Forecast. Based on current repairs in progress, what will you collect this week?

This takes 15 minutes and prevents surprises. Most cash flow crises are visible two weeks in advance if you are paying attention.

Pricing for Cash Flow

Your pricing directly affects cash flow. Two adjustments that help:

Collect Deposits on Large Repairs

For any repair over $200, collect a 50% deposit at intake. This covers your parts cost and reduces risk if the customer never picks up.

"The estimated repair is $350. We collect a $175 deposit to order parts, and the balance is due at pickup."

Minimize Free Diagnostics

A free diagnostic costs you 30-60 minutes of technician time with zero revenue if the customer declines the repair. Charge $25-45 for diagnostics and apply it toward the repair if they approve. You collect something either way.

Accounting Basics

Separate Business and Personal

If you have not already, open a dedicated business checking account. Every business transaction goes through this account. Every personal expense stays out. This is not optional — it is how you see your real cash flow.

Track Revenue by Category

Know where your money comes from:

• Repair labor (should be 50-60% of revenue)
• Parts sales (should be 30-40% of revenue)
• Maintenance programs (growing recurring revenue)
• Diagnostic fees (small but consistent)

If parts revenue is below 30%, you may be undercharging for parts or not recommending additional work during repairs.

Set Aside Taxes

Set aside 25-30% of net profit for taxes in a separate savings account. Do not spend it. Quarterly estimated tax payments are due in April, June, September, and January. Missing these creates penalties and cash flow shocks.

How Bench Supports Financial Visibility

• Invoice tracking. See all outstanding invoices, their aging, and payment status in one view.
• Revenue reports. Track revenue by period, by technician, and by repair type. See trends over time.
• Parts cost tracking. Track parts cost per repair to monitor your margins.
• B2B account management. Set credit limits, track balances, and see aging receivables for contractor accounts.
• Payment processing. Stripe integration for text-to-pay means faster collection and fewer uncollected invoices.

The Bottom Line

Cash flow management is not glamorous, but it is what keeps your shop alive. Know your break-even number, collect payment before releasing repairs, build a 3-month reserve, and check your numbers every Monday. The shops that close are almost never the ones with the worst skills — they are the ones that ran out of cash. Do not be one of them.