Where to Find the Best Equipment Cost Data

When it comes to knowing costs, equipment data can be scattered across an organization, with each source telling a different story. The critical question is: Which dataset is the real source of truth for equipment costs?

Accurate and timely data is essential for decision-making, but perspectives vary. Maintenance trusts the work order system, Operations depends on job tracking, and Accounting considers financial records as definitive. Each perspective is valid, but determining the real source of truth requires understanding how costs, charges, and data flow through the organization.

What equipment data is available in a CMMS?

A CMMS manages and tracks maintenance activities, automating many tasks to ensure equipment is properly maintained. Here’s what a CMMS excels at:

• Work orders: Work orders detail tasks, equipment, parts needed, and personnel to complete the tasks. They include preventive maintenance, condition-based tasks, and one-offs for down-events, damage, or capitalization-related costs.
• Asset lists: Lists contain detailed information about each piece of equipment, including make, model, serial number, purchase date, and warranty information. This data aligns with matching equipment to operational needs and classifying equipment for internal rate charge-out systems.
• Inventory management: Keeping track of spare parts and supplies ensures that necessary items are available when needed, reducing downtime.
• Maintenance history: Logging all maintenance activities performed on a piece of equipment provides a history that can be used for repair analysis.

Although a CMMS provides vital data for maintaining and managing equipment, it has certain limitations.

• Cost tracking: Most systems operate outside the organization’s enterprise software, lacking integration to true-up to actual costs or reconcile and report on the total cost of ownership (TCO). A CMMS may track certifications and registration renewals, but it does not account for depreciation, insurance, lease, or rental payments, thus omitting ownership costs.
  The system captures only maintenance-related costs such as parts and labor. Without integration to accounting software, labor rates remain generic and user-defined, are not fully burdened, or do not reflect overtime premiums. Parts and consumables such as bulk lubes, tires, or any non-inventoried items are challenging to track, apply to work orders, and allocate costs. Field activities like managing wear parts, grease, fuel, and consumables are also overlooked because they are handled by operations and not formally tracked.
  A CMMS also does not capture or allocate indirect or overhead costs such as the shop facility and the salaries of non-repair staff. Any attempts to include these indirect costs are often makeshift solutions resulting in variances and increased administrative burden.

• Usage tracking: A CMMS is great for tracking meter readings necessary for scheduling maintenance but not for tracking billable hours tied to how equipment was used in the field, which is crucial for accurate utilization metrics and cost recovery.

Since CMMS systems are designed around work orders, they are reliable for maintenance and repair history but incomplete for total cost reporting. Experience has shown that cost accuracy for CMMS systems hovers around the 85% mark for operating costs and less than 10% for ownership costs.

What equipment data is in project tracking systems?

Project-tracking systems are essential for frontline field operations, helping to track labor, equipment, materials, subcontractors, and other costs incurred to generate revenue. Key strengths include:

• Schedule management: Manages project timelines with detailed schedules and deadlines, ensuring tasks and team members advance revenue-generating work.
• Resource allocation: Allocates resources effectively, including labor, equipment, and subcontractors. Configured properly, some can even track equipment availability and usage to minimize downtime and optimize utilization.
• Cost tracking: Integrates various expense categories, providing original estimates, projected budgets, and the tracking of actual expenditures against them.
• Real-time updates: Provides real-time project status updates, allowing project managers to quickly identify change, address issues, and keep projects on track.

These systems also have limitations.

• Integrations: These tracking systems rarely sync and integrate seamlessly with accounting and other software, leading to unreconciled, or preliminary, financial data.
• Equipment-specific items: Project software lacks detail on maintenance history, depreciation, and operating costs, obscuring the true cost of equipment usage. They either lack equipment costs entirely or use some form of user-defined value or internal rate to charge projects for equipment use. These rates are based on estimated ownership and operating costs. Any deviations to actual costs incurred or usage from the assumptions used to create these estimated rates result in variances that impact bottom-line financials which only become apparent as costs are reconciled after a project is completed—leading to skewed margins and profitability. 
  Any operating cost not covered by the internal rate, such as wear parts, grease, fuel, consumables, steam cleaning, and operators, are often coded directly to the project rather than tagged or tracked to specific pieces of equipment due to system or administrative limitations.
  Data inputs for non-project-related metrics, such as time and costs spent greasing, fueling, or even entry of equipment meter readings and usage are lower priority than field production metrics like lineal meters or banked cubes. This incomplete data capture for equipment-specific information leads to an inability to see and respond to preventive maintenance and underutilization.
• Indirect cost allocation: Systems do not track or allocate indirect costs, such as overhead, to specific projects, and rely on percentages or estimates.

Project tracking software is invaluable for managing project schedules, resources, and estimated costs. It has limitations, however, in capturing complete and accurate equipment usage and the variances between charges and actual costs. This creates a “margin mirage” that ultimately impacts bottom-line profitability.

What equipment data is in accounting systems?

Accounting software and enterprise resource planning systems (ERP) produce the financial statements for the organization and generally handle all money-related functions, linking payroll, accounts payable, purchasing, etc. The strengths of these systems include:

• Cost reporting: The interconnected nature of the ERP systems across payroll, A/P, purchasing, and other monetary systems ensures both accuracy and timeliness in financial reporting, making it the most accurate source for equipment cost data. The accounting system tracks or calculates all ownership costs, including purchase, depreciation, insurance, license, and registration. It captures all operating costs from maintenance to field operations. The system also includes all indirect costs, from workshop and yard expenses to head office and corporate general and administration (G&A).
• Internal rates and variances: The accounting system contains and administers the internal rate tables and charges for equipment use, making it easy to compare actual costs versus internal rate recovery and identify variances.
• Profit & loss: Accounting software produces P&L reports. It can produce P&L reports by fleet, class, or unit, simplifying the analysis of over/under recovery.

Cost data is certainly the primary benefit of accounting systems, but there are some limitations that include:

• Asset lists: The system tracks assets meeting the capitalization threshold but often ignores those that do not. Depending on the capitalization threshold, items like buckets, generators, or light towers might not be listed.
• Cost coding: This requires an appropriate level of detail in the cost code setup with consistent usage.
• Data entry detail: Accurate data requires integration with input sources such as time entry, telematics, or manual data collection, which can be administratively burdensome. Manual entry often results in a significant loss of detail and accuracy due to human nature and error.
• Statistical data: Non-monetary data should be viewed skeptically within ERP systems. Unless internal rates or units-of-production require the collection of billable hours or meter readings on equipment, it often results in incomplete data.

Accounting and ERP systems are the most accurate source of equipment costs and data, making them the primary source of truth for the critical step of knowing your costs.