What is the difference between Material Inventory and Tool Inventory?
Most companies do a pretty good job tracking inventory. The materials purchased to be used for jobs normally get tracked well. They are costed to jobs either when purchased or when shipped to the job. The warehouse manage dutifully fills out PO\’s, requisitions and shipping documents so that every dollar is tracked.
For most contractors small tools and equipment largely get handled just like all other inventory. But are they like all other inventory?
Tools usually have a 3 year life span. Small equipment is normally expected to last 5-10 years. Over that time this equipment is used on many many jobs. That is unless it is lost or stolen.
According to Modern Contractor Solutions, “More than $1 billion in valuable tools… are lost each year.”
This is often because contractors try to track tools like all other material inventory. But tools are different. They are an asset with a life expectation and a value beyond any individual job. Thus, they need a different process for tracking that is unique to their needs.
It’s an operations problem not an accounting problem
Unfortunately, many companies deal with tool tracking – an operations problem – by trying to use accounting policies to get field personnel to be responsible for tools. Often this takes the form of a tool time sheet or sign out log. This rarely works. In the end the accounting policy just becomes one more thing field people have to do but which doesn\’t help them complete the job.
Get rid of spreadsheets and start tracking
A better solution is to get a system that is specifically designed to help contractors track tools and small equipment. A mobile system that moves with the field personnel from job to job allowing them to maintain a tool inventory as they move. Most importantly, a good tool tracking system is one that the employees want to use. It gives them an easy way to search for tools. To find out if equipment is in the warehouse or on another nearby jobsite. If an app works for the field foreman then it is something they will want to use instead of being a burden.
A good material inventory system is still important. It is simply distinctly different from a good tool system. Here is a link to a good article about the best small business inventory apps.
Deploy a good material inventory system but also deploy a good tool and equipment tracking app. Materials, Equipment and labor are all growing increasingly costly. Be sure you are tracking all three well.
For more research on tool tracking please see these articles:
If you’d like to learn more about modern tool tracking applications check out ShareMyToolbox or call, 866.768.8665.