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Machine Operating cost??? Per hour? Without operator?

Oxbow

Senior Member
Joined
Nov 22, 2012
Messages
1,201
Location
Idaho
I agree with the aforementioned (learned that word from Nige) sentiments regarding tracking individual equipment expenses. Perhaps as we begin to acquire more equipment I will need to invest in a fleet management software program. I use Quicbooks as well, and it is unfortunate that hours on a machine cannot be plugged into it to reflect the cost per hour. I end up using a simple excel spreadsheet to track what little we have to keep track of, but it requires double entry of receipts, and I HATE entering receipts.
 

briscoetab

Well-Known Member
Joined
Jun 28, 2013
Messages
56
Location
West Texas
Occupation
Mechanic Formen and Equipment operator
Oxbow, if you get a fleet management software the one I use is pretty good. I tried 2 or 3 before I decided on TATEMS. I only use the trial periods on the ones I tried and decided on TATEMS because it pretty much tracked everything I wanted without to much extra stuff. It is not perfect by any means but it's pretty good. Their are a couple of things that are annoying and wish they would change but it is a pretty good program and I haven't seen any bugs in it yet and I have been running it for a year and a half. I am in no way affiliated with this product.
 

theironoracle

Senior Member
Joined
May 5, 2012
Messages
940
Location
PACWEST
Occupation
OWNER/OPERATOR MOBILE HEAVY EQUIPMENT REPAIR
Wow, this is a heck of a discussion. I complain a lot about my previous employer but when it comes to equipment and job costing I must say they did a great job! I will establish one definitive rule here "the total cost of equipment must be kept track of by accounts receivable" why? they pay every invoice for the entire company they have to cost it to wherever it goes I don't care if its a new computer for the office or the trip for the owners to con/ag in vegas or the pipe for the job or the hydraulic pump for the excavator it all gets entered by accounts payable into the correct cost account... now as equipment manager it is your job to be sure that every invoice has an equipment number on it that the shop purchased! how did I do this? my vendors which is used the most had a note that popped up on there screen which said PO required at that point I gave them an equipment number, now I did have many invoices which didn't get equipment number for whatever reason, at this point about once a month when accounts payable was reconciling invoices against statements to be paid they would call me and say there is a $326 invoice missing say from the kenworth dealer at this point I would have to think back and maybe talk to the other mechanics or look at work orders or time cards or whatever to decide that it was say an alternator (this process which is time consuming makes you very good at being sure you got equipment numbers on every invoice). Now at this point you get a report from accounts receivable and you decide how many hours machine has run over the year and plug those numbers together and have a cost per hour!!!!! This number however is not anything by itself that sell/purchase decisions can be made!!! the largest cost of owning a machine is its devaluation for many years and if you are still putting considerable hours on a machine the point where the devaluation and the repairs (not operator error broken stuff and not maintenance) are equal is where you replace or retire it.. Lets deal with the tire invoice question were the operator/driver takes care of this work himself first on a licensed vehicle in regards to creating numbers to sell/purchase a replacement vehicle these numbers are not important, why? because these tires will get ruined or go flat if the truck is new or old, regardless of that you want to keep track of this! ok then the accounts receivable does not pay that invoice unless it has an equipment number on it!!! This will come to you at the end of the month and you will have no idea what truck it went to so she tells you it was a flat repair for a 11/24.5 tire you then know it went on a large truck and you cost it to (heavy truck misc) at the end of the year when you get that report and there is $12000 is this account you divide it in proportion from whatever truck cost you the most and whichever cost you the least (I hope I made that clear).. so in regards to filling out a time card so it gets costed correctly, my time would look like this x-y-z (example) x=equipment number y=what you did z=job location, x equipment is self explanatory , y could be repair, parts ordering, driving, labor, fabricating, operating, estimating, we split sewer pipe from water pipe, sub grade from finish grade on and on, the more numbers you have the better you can estimate the next job these numbers were consistent through the entire company everyone used them, obviously a mechanic would use repair mostly but parts ordering sometimes and driving a lot also, job location was important because we all had base wages which were paid in the shop while driving and all private work, on government jobs you were paid according to "davis bacon" or certified payroll rate this changed all the time depending on which job it was and yes your payroll department has to take care of all of this.....I got to go ask more question I will try to answer...........TIO
 

Oxbow

Senior Member
Joined
Nov 22, 2012
Messages
1,201
Location
Idaho
Thanks briscoetab, I'll look into it. On a similar note, has anyone tried the product advertised on TV called NeatDesk, or Deskneat? It scans reciepts and then allows one to organize them on the computer, I think.
 

briscoetab

Well-Known Member
Joined
Jun 28, 2013
Messages
56
Location
West Texas
Occupation
Mechanic Formen and Equipment operator
I understand all of what you are saying theironoracle but I still do not see how they are suppose to keep track of all the parts and fluids I keep in stock. We pretty much do track our expense the way you are saying and many times the secretaries come and ask me about PO's and what they go to. We also have the messages that pop up on vendor computers about having to have a PO.

The tire stuff as an example, those guys have to have a PO to get a tire with equipment number and the secretary knows about it but I don't. I guess the problem is they have all the info but not all of it is completely broken down to individual equipment, I don't have all the info but it is broken down to all the individual equipment.

I cannot put equipment numbers with this stuff at time of purchase because a lot of it I have no idea what it is going to be used on. I probably have 10,000 dollars worth of stock that I keep on hand (this is a complete estimate maybe much higher or lower but I expect it is close to 10,000). Now some of the filters I do know exactly where they are going but then I have air hose, lights, mud flaps, batteries, hydraulic fluid, air compressor fluid, engine oil, gear oil, anti freeze, weather seal, backhoe teeth, air line fitting and so on, I think you get the point. Now I feel like if these items are just completely ignored or divided evenly to all equipment I would not be getting a good estimate of my cost.

Maybe what I need to do is set down with the boss and secretaries and see just what we have. We do track our job cost and equipment expense but like I was saying earlier on the equipment expense much of it is not divided down to individual equipment. Maybe they have it pretty close to the way you are talking about tracking it and I just didn’t know it. I may possibly be the reason we are not able to track the equipment cost but I just don’t know how I can order all the stuff I need and assign it all to each individual piece of equipment. We may be tracking equipment cost per hour and I just don’t know it but if we are the number is not correct.

Sorry to keep beating a dead horse, I am just trying to understand the proper procedures to keep track of these items. I do appreciate all the advice that everyone has already given and understand if you are through with this thread. Maybe I am just slow and you have addressed the issues I am asking about and I just don't get it. Thank you.
 

Oxbow

Senior Member
Joined
Nov 22, 2012
Messages
1,201
Location
Idaho
briscoetab, I completely understand your frustration regarding oil, filters etc. that you stock but have not applied them to a particular machine. It is almost as if you need to "re-sell" from your stock inventory to a particular machine when it is used, but that would really make things complicated. Just dividing the stocked items uniformly over all the equipment in the fleet does not reflect the operating cost of each machine very well.

I'm grateful for the lengthy explanations that everyone has posted, and I guess if it were simple then we would not have much to talk about on this thread.
 

briscoetab

Well-Known Member
Joined
Jun 28, 2013
Messages
56
Location
West Texas
Occupation
Mechanic Formen and Equipment operator
Yea that is kind of what I was thinking Oxbow, that you would have to resell to yourself and like you said this would get very complicated. That is why to me it seems easier to track all expense at my level for individual equipment cost and then track overall equipment cost in the accounts payable. Obviously though it isn't very easy because that is what I am trying to do now and I am on here asking questions.

All of our equipment costs go to accounts payable but for stuff that hasn't been assigned a piece of equipment I just write shop/equipment on PO's. So accounts payable know it's an equipment cost, just not which piece of equipment.

I have all my stuff set up to where I can track all of this; I'm just losing stuff in the paper trail or laziness of employee's.
 

John C.

Senior Member
Joined
Jun 11, 2007
Messages
12,865
Location
Northwest
Occupation
Machinery & Equipment Appraiser
I've been reading this with great interest.

When I started in the business the companies I have experience with just lumped all the equipment costs into one account and managed the company from there. The costs were broken down by major item, fuel, repair parts, maintenance items, tires, ground engaging, capital cost, insurance and so on. The engineering staff, if there was one, just crammed these figures against income and tried to decide whether or not the company was making the money they wanted to make. Sometimes I saw short cuts like cost per ton against number of employees or fuel cost per ton of production and other such nonsense. It is actually funny that the costing issues seem to be addressed more from the mechanic staff fixing the iron than the engineering staff.

When I was running a shop or two is that payroll and costing are two completely separate functions and when I was trying to reconcile cost per hour on individual machines the clerical staff in the main office and in my office just couldn't comprehend each other. What I wanted to accomplish was operators and mechanics filling out time sheets with items like fluids added, down time reasons, hour meter readings, parts and so on. I'm pretty sure that even today Quickbooks separates payroll and payables. I did set up job costing even in my own business but still had to manually input that information. Consequently I usually had six or eight hours a month of just inputting that info. At any rate I feel your pain. The only businesses that seemed to track labor directly were equipment dealerships because they were paid on the labor hours and parts purchased. I always thought that system should be directly applicable to any company.

Last time I looked I think there was a not too hard way to set up a stock account in Quickbooks from which supplies can be doled out from. As I recall it even makes pilferage a pretty easy item to track item.
 

dozier man

Member
Joined
Jan 14, 2014
Messages
20
Location
north ga
i cant help but was wondering about this in my area a bobcat or mini ex runs around $75 per hr for asample if go out to a small residental job and do 8 hrs of grading @75 per hr which is 600 by the time you buy fuel for truck to haul equipment fuel for tractor and if you pay an operator theres maybe 350 or so left how do these guys make money on this type of prices after maintence and insurances if there not doing this every single day
 

dozier man

Member
Joined
Jan 14, 2014
Messages
20
Location
north ga
i cant help but was wondering about this in my area a bobcat or mini ex runs around $75 per hr for asample if go out to a small residental job and do 8 hrs of grading @75 per hr which is 600 by the time you buy fuel for truck to haul equipment fuel for tractor and if you pay an operator theres maybe 350 or so left how do these guys make money on this type of prices after maintence and insurances if there not doing this every single day

reason i said this i bid small jobs and this is what gcs tell me they pay. i just dont see any reason to work this cheap or am i wrong for thinking that
 

Actioninc

Active Member
Joined
Dec 30, 2008
Messages
31
Location
Midwest
reason i said this i bid small jobs and this is what gcs tell me they pay. i just dont see any reason to work this cheap or am i wrong for thinking that

Dozierman,

I started out in that environment and I remember thinking the same thing, why so cheap!? What I found out is the companies that are established keep the little hourly stuff around like digging basements, fine grading, etc. for the cash flow. They usually have bigger contract jobs going that make the money. It is handy for them to have the little stuff around to keep some money flowing while waiting for the big monthly checks. That being said, if all they do is small hourly stuff, then my goodness they better be doing it 6 days a week 10 hours a day....

This has turned into a great thread with lots of info you cant buy, thanks to all the above for the insight! I am at that point where you have a feeling when a piece of equipment needs to be replaced, etc. But it sure would be nice to have some actual numbers to back that decision....


Thanks again
 

dozier man

Member
Joined
Jan 14, 2014
Messages
20
Location
north ga
if all they do is small hourly stuff, then my goodness they better be doing it 6 days a week 10 hours a day....

thats the problem im having in the residential market thats all these guy do is the small hourly stuff ,i have been trying to back away but cant seem to find a way in to the commercial market im thankful for the gcs that i have that keep me busy but its just not enough
 

TeamRental

New Member
Joined
Dec 8, 2014
Messages
1
Location
Michigan
Hey Oxbow,

I know this is a long shot because this post is from 2 years ago but I was wondering if you could send me that spreadsheet file about rental rates? I've been trying to make a spreadsheet exactly like yours for a month now!
We own our own construction equipment rental/sales/service and I am looking to tighten up the boots on a lot of things that have slipped since the economic downturn.

Thanks in advance =)
Steph
 

JBGASH

Senior Member
Joined
Jan 1, 2011
Messages
758
Location
Missouri
Occupation
Plumbing & Excavation Contractor / farmer
Oxbow, I would really appreciate it if you could send a spreadsheet to me also at jgash@ctcis.net. That really looks like a great way to track those expenses. Thanks again.
 

Oxbow

Senior Member
Joined
Nov 22, 2012
Messages
1,201
Location
Idaho
Oxbow, could you please send 1 more to: wellsnh@yahoo.com
I spend a good part of my winter trying to figure out costs, production rates and estimating data.

Thanks so much!

Oxbow, I would really appreciate it if you could send a spreadsheet to me also at jgash@ctcis.net. That really looks like a great way to track those expenses. Thanks again.

Spreadsheet sent. Remember to plug your own numbers in. Our rental rates may be higher due to our relatively short construction season, and some of the rental rates are based on weekly as opposed to monthly.

Oops, I forgot to attach it. I'll try again.
 
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