Questions and comments about paint material profitability have come up more often recently. The comments are always about the increase in the cost of paint and people questioning the accuracy of the material allowance on damage appraisals stating it isn’t enough. These questions and comments remind me of an article I wrote in August 2022 explaining the fallacies of the materials multiplier.
In that article, I discussed how I believed the paint materials multiplier was created when basic black was the only color option. To emphasize the need for collision repairers to improve the way they seek paint material reimbursement, I am revisiting portions of that article and updating it to reflect the changes I have seen in the industry.
"Paint colors are now way beyond basic black, but materials are still multiplied based on estimated paint hours like they were for single-stage colors. While a multiplier has been added for clear and three-stage colors, the process has not kept up with the changes we have seen in color composition:
The Ford color I have been talking about is paint code A, Raven Black, nothing special just a basic black that has been around since paint codes were invented, hence the “A” designation. Using the materials calculator for a ten-hour job with a reimbursement rate of $36.00, you would receive $360.00 in materials allowance. Over the years that basic black color has evolved into Absolute Black Pearl and Agate Black Metallic all while the materials multiplier has stayed the same. This poses a big problem for collision centers because as colors have become more complex, they are still reimbursed for that basic black.
With the addition of pearls and metallics to make colors more vibrant, the cost of creating these colors increased significantly. That $360.00 calculated for the basic black is no longer sufficient to cover the costs of the additional materials used to replicate the newer colors. Estimating database providers have modified their programs to keep pace with the changes but there are too many variables in the colors to create more than an estimate. This has left the collision centers short-changed when a materials multiplier is used.
Paint colors will continue to evolve and costs to replicate them will incrementally increase as the colors become more and more complex. With those complex colors using a variety of toners and additives, the only way a collision center can get proper reimbursement for materials is to itemize the products used in creating the paint mix. As paint is mixed on a computer-based mixing system each component consumed is recorded by quantity and cost. The key is everything consumed during the refinishing process must be mixed using the computerized mixing system to calculate the true cost."
I encourage you to review paint costs on every repair and prepare a paint invoice to improve your paint material reimbursement. The paint invoice can be presented to a customer or third-party payer just like you would a parts invoice to collect the proper reimbursement.
Documenting the additional paint materials on your damage appraisal as illustrated below and using the invoice as validation will satisfy the requirements of most third-party payers. The key to the line note is to address the complexity of the modern colors.
Invoicing for paint materials is no different than billing for a hood or fender; paint is a part, just like any replacement component. There are several invoicing systems available that allow you to itemize products used in the refinishing process. I encourage you to research those systems or work with your paint supplier to set up an invoicing process to begin billing for materials today. Invoicing will not only improve your paint material reimbursement but help you track material consumption and stabilize your paint material inventory as well.
