Electron AppsShop finances
Count truck stock monthly, not at year end
Most shops count what is on the trucks once a year, for the accountant. By then the money is gone and nobody remembers where it went.
Before I joined Electron I spent eight years doing books and taxes for trade contractors around Raleigh. The year-end truck count was always the same scene. Techs pull everything off the van on a Saturday in late December, somebody tallies it on a clipboard, and the number goes on the balance sheet. Then the owner looks at the gap between what was bought and what was billed and says, every year, "That can't be right."
It usually was right. It was just twelve months late.
What an annual count hides
A typical residential HVAC service van carries somewhere between $6,000 and $15,000 in parts. Plumbing vans run a bit less, though water heater shops are an exception. Multiply by a 12-truck fleet and you have more than $100,000 of inventory rolling around town with no one watching it day to day.
In the shops I worked with, the gap between parts purchased and parts billed usually landed between 4 and 9 percent of parts spend. Some of that is honest. Parts get used on warranty work, on callbacks, on the owner's mother-in-law's house. Some of it is not billed because the tech forgot to add it to the ticket. A small piece of it walks.
The problem with counting once a year is that all three causes look the same on the balance sheet. You cannot fix a leak you cannot locate.
A monthly routine that does not eat a Saturday
You do not need to count every truck, every part, every month. You need a cycle count. Here is the routine I recommend to shops that ask.
Pick 20 parts. Choose the 20 items that make up most of your truck-stock dollars. For HVAC that is usually capacitors, contactors, motors, a few common refrigerant fittings, and filters. For plumbing it is fill valves, cartridges, supply lines, and the fittings your techs grab every day.
Count three trucks a week. Rotate so each truck gets counted at least once a month. A tech with a phone can count 20 bins in about ten minutes at the start of a shift.
Compare against what the system expects. Starting quantity, plus restocks, minus parts billed on tickets. If you are running Electron with truck inventory turned on, the expected count is already there.
Look at variances by truck, not by part. A part that is short on every truck is a pricing or process problem. A truck that is short on every part is a conversation.
What the shops that do this find
Last year we asked 14 customers who turned on monthly cycle counts to share what changed after six months. All of them were between 8 and 30 trucks.
The biggest finding was boring and expensive: unbilled parts. On average, about two thirds of the variance traced to parts that were used on a billable job but never added to the invoice. Once the shops saw it truck by truck, most fixed it with a close-out rule that will not let a tech finish a ticket without confirming parts used.
One plumbing shop in Durham found that a single part, a particular brand of tub and shower cartridge, was short on every truck by roughly the same amount. The techs were installing it on warranty callbacks and not recording them. That turned into a warranty claim process with the supplier and about $3,800 recovered over the year.
Across the group, parts gross margin improved by between 2 and 6 points. For a 15-truck shop billing around $600,000 a year in parts, that is real money.
What it costs
Ten minutes per truck per month, and someone in the office willing to look at the variance report and ask questions without making it an accusation. The second part is harder than the first.
If you want our cycle-count template or help setting up truck inventory in Electron, email me. I am happy to look at your numbers.
If this is the problem in your office, book a walkthrough or email miked@electronapps.com.