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#158636 - 07/26/06 01:56 PM Inventory
Jps1006 Offline
Member

Registered: 01/22/04
Posts: 609
Loc: Northern IL
I am in the process of developing a job-costing strategy. As it is right now, the only way I can figure doing it accuratlty is to start tracking inventory. Track van stock, shop stock, etc. I guess I'll probably use Access or possibly use Quickbooks (not likely due to software's inflexability). But I am wondering if any of you are tracking inventory. A short list of questions if I may, and as alwways I'm interested in owner/manager input as well as employee.

1. Does your company track inventory?
2. What was the point that made it worthwhile to begin tracking? How and why did your company decide it was needed?
3. Who is responsible for the paperwork?
4. How do you varify accuracy?
5. What software do you use for the processes?

Thanks as always.

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Business, Office, Estimating, Legal:
#158637 - 08/08/06 08:08 AM Re: Inventory
Radar Offline
Member

Registered: 04/30/04
Posts: 349
Loc: Los Angeles, CA
I'm curious about something - since we're talking on a "job cost strategy" level here. How does inventory relate to job cost accounting? On a fundamental level, goods in inventory are generally items you've bought and paid for that haven't been used on a job yet, and hence are not yet part of any job's cost.

I once worked for a large Los Angeles area contractor who also ran 30 or 40 service trucks around town. They had a warehouse larger than most wholesale houses, mainly to support their service business, but contract jobs would frequently receive materials from the shop warehouse also. The shop warehouse was set up like a vendor, and the contract job would have the book price for materials delivered out of the shop warehouse posted against the job.

I recall that materials from the shop warehouse cost more than materials from the wholesale house - so the shop warehouse made money at the expense of the contract job. This was somewhat irritating but there was no recourse.

Radar
_________________________
There are 10 types of people. Those who know binary, and those who don't.

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#158638 - 08/08/06 09:45 AM Re: Inventory
macmikeman Offline
Member

Registered: 07/16/02
Posts: 718
Loc: Honolulu, Hawaii
Radar, that is an inefficient way to conduct a project in my opinion. Unless timely delivery is a problem from the local supplier's it would have been more cost effective to have them store the materials at the vendor's expense in the vendors warehouse prior to purchase and delivery.

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#158639 - 08/08/06 12:59 PM Re: Inventory
sparky 134 Offline
Member

Registered: 09/04/04
Posts: 92
Loc: Joliet, Il, USA
I was given some advice a while back concerning inventory. Even though you buy material for inventory you cannot write it off on your taxes until the material is used for a job.

And, material that is kept in inventory will incur taxes at years end.

I was told to expense all material purchased out to a job. Do not keep inventory. Yes, this will skew your job cost report somewhat.

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#158640 - 08/08/06 01:46 PM Re: Inventory
PE&Master Offline
Member

Registered: 02/25/06
Posts: 138
Loc: TX, USA
Sparky hit it on the head. Keeping track of inventory is creating overhead costs and is likely done during hours that should/could be billable to someone.

I expense items to the project as they are purchased and theorically have no inventory. I'll have some #12 wire, 4 squares, beam clamps, wirenuts, etc kept in a trailer that I do not track. This works out when your doing a one or two day commercial project that needs some odds and ends that you don't want to bother with (or wait on) having a supply truck bring.

What is a loss on one job is made up on the next. A larger shop, say one with over ten employees, may need to keep the books tighter but this is why they are not as profitable per man as a small shop.

If you can arrange the inventory be 'filler work' during off peak times then at least it's not a total loss. The advantage here is that the guys counting may be a little more prone to keeping things in order if they know they have to sort it all out later for inventory!!

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#158641 - 08/08/06 02:17 PM Re: Inventory
Radar Offline
Member

Registered: 04/30/04
Posts: 349
Loc: Los Angeles, CA
Mike - You are right, and when I was working there they were starting to rely more on the big mega wholesale houses who had nearly everything in stock and ready to roll, but the shop's warehouse still existed. There was an ongoing struggle between dear old dad (the originator of the firm) who was to retire and the newer managers running the business regarding this warehouse issue. Old school vs new school.

Anyway, the other follow up posters here described what I've seen more often - a small shop inventory of mostly surplus, left over materials that is not tracked because it has already been job costed to some project or another. However, I'm trying to understand what the original poster was describing, which sounds to me like a tracked inventory treated separately from "jobs". Maybe for some types of service work this is a worthwhile effort. Maybe not. More opinions?

Radar
_________________________
There are 10 types of people. Those who know binary, and those who don't.

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#158642 - 08/09/06 06:09 PM Re: Inventory
Jps1006 Offline
Member

Registered: 01/22/04
Posts: 609
Loc: Northern IL
Computer went down over the weekend. Thanks for the replies.

All I'm really looking to do is tighten up the numbers a little better and mechanize the procedure to take some burden off the the guys in the feild and let them focus on other issues. Most of the proccess is performed already, I just want to introduce the computer to "remember" what parts went and/or are where. The system looks something like this:

All receipts have a job name or destination name ("so-'n-so's truck, or shop). Every time material is moved from one loaction to the other it is documented on a sheet in the field.

Bill's truck-----> Job XYZ
Shop ------------> Job XYZ
Supply house (recepit) ---> Job XYZ
Job XYZ----------> Fred's truck
Job XYZ----------> Job ABC

You get the idea. All sheets are turned in to be entered by an office person. The adds and subtracts should all settle to a bottom line of what you have purchased and where it is. Then (as Les does) quarterly or whenever do an audit. That will tell you how accurate it is.

Right now I am a 3-4 man shop including me, but I want to develop a system that is "scalable" as they say. I would rather develop the system first and then plug the people into it.

But this info is needed and needed to be accurate if one has any hope of looking to see how well a job went, check against bidding, catch mistakes, reward or punish performance, or begin a profit sharing program that is fair, and by fair I mean accurate.

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#158643 - 08/21/06 06:25 PM Re: Inventory
Jps1006 Offline
Member

Registered: 01/22/04
Posts: 609
Loc: Northern IL
What are the big EC’s using to track material? Are they using software or doing it by hand? Are they tracking it by PO number and using a PO process? Does anyone know how that works?

What about for service trucks with a lot of tedious turnover between service calls and small remodel jobs that might have some truck stock and some material ordered specifically for the job?

If nobody has a good solution yet that leads me to my next question: Am I the only who wants what I am describing, or if I could write (and/or hire out) software to handle this, does it sound like something you would buy?

I am currently using QuickBooks Pro and have been researching the possibility of creating an Access database for entering in receipt data etc. with the ability to add a bar-code scanner that will tell me what material is where at anytime. I have found a way to make all the different software talk to each other, but it is going to take quite a bit of coding and research into how QuickBooks works. Job Costing would be done in Access pulling customer and invoice info from QB. I would track time & material spent on jobs by employee, invoice and/or estimate number, change order no. etc. Ultimately I want to view profitability many different ways to pick out trends. A particular employee is consistently more profitable, a particular contractor is consistently less profitable, a particular week went really well. Then I can look back to analyze what we did right or wrong in different situations. Isn’t this stuff you want to know, or have you resigned to it being to cumbersome to consider wanting it?

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#158644 - 08/22/06 09:58 AM Re: Inventory
macmikeman Offline
Member

Registered: 07/16/02
Posts: 718
Loc: Honolulu, Hawaii
Where it could really help is if there is a possibility of employee shrinkage going on. You know- the weekend warrior side job using your materials. Those are deadly. If I was an employer, I would either have to be certain none of this was going on with my workers or I would have an inventory system in place to prevent it. But since I am just a one man shop, I will let everybody else deal with it instead.

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