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Maintain Margins: Costing Out Consumables To A Job

Posted by Greg Dooley on 4/15/16 11:03 AM
Greg Dooley
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Regardless of how in depth you are with managing your inventory, I bet you have had some conversations regarding consumables. Typically, that conversation revolves around getting a handle on consumables costs related to a job.

The next question is, "Is it worth the time and hassle to track consumables?"

Well, I am here to say, "Yes it is," and offer some insight on how I have assisted many contractors in doing so.

So dive into the world of costing consumables...

Types of Consumables

Consumables vary depending on the industry your in. It typically starts with the shoe covers and cleanup supplies used on most jobs, but it can also grow to include small fittings, wire nuts, PVC, and even copper and refrigerant. Depending on the trade, and in some cases the tech, getting a handle on these expenses as it relates to a job becomes even more paramount. Pair that with the fact that these items are typically ordered in bulk, yet used individually...thus the problem grows.

You want your techs to identify the items used to help you get more precise profit margins, but you really don’t want them spending the time identifying the 3 wire nuts and length of electric tape they used replacing the ceiling fan. 

Instead of looking at these items individually, try taking a look at these items as a single expense. When your technicians identify their inventory they used for replenishment, have them also quickly include a single consumables item. Take this one step further and you can create levels of consumables, for example:

Level 1 Consumable: $5
Level 2 Consumables: $10
Level 3 Consumables: $15

With a little coaching your technicians can use their best judgment on how much they used and select that item so you can really hone in your margins, and the best part? This takes all of 20 seconds for the tech to complete.

I have worked with contractors who have used this process not only for basic consumable materials, but have taken it a step further to include additional consumable levels for higher priced items like copper, refrigerant,  propane, and even fuel for the truck. Think about it, you buy refrigerant in 10 or 20 gallon containers, but use it just few gallons at a time. You don’t want your techs to put the whole container down as an expense, but you certainly want that expense costed to the job.  This gives you that controls in a simple item for the tech to enter.

In conclusion, getting a handle on consumables on a job can really help you get precise margins.  By creating a single expense item you can get specific job costing while limiting the hassle for the technician on the job.

Tags: Pricing and Margins

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