Truck Stock: Inventory or Expense? And Is Your Flat-Rate Price Book Right?

Either can work in your books, as long as you pick one method and stick to it. Many plumbing shops expense routine truck stock when it's bought. If you carry a lot of parts, or expensive items like water heaters, tracking truck stock as an asset and counting it gives truer monthly numbers. How it's treated on your tax return is your CPA's decision. Once parts and labor are recorded consistently, you can check your flat-rate price book against what each kind of job really costs.

Inventory or expense: the bookkeeping answer

Truck stock is the fittings, valves, supply lines, cartridges, glue and odds and ends your techs carry so they can finish most calls without a supply house run. It gets bought in bulk, loaded onto trucks and pulled for jobs all month. The bookkeeping question is when those parts become a cost: the day you buy them, or the day they're used.

There are two ways to keep the books, plus a mix of the two.

• Expense it when you buy it. Every restock goes straight to a parts or materials cost account. Simple, and it works well when the stock on your trucks stays about the same from month to month.
• Track it as an asset and count it. Restocks go to a truck stock asset account, and a regular count tells you what was actually used. More work, and much truer monthly numbers when stock levels move around.
• A mix. Routine small parts are expensed when bought, while expensive items, such as water heaters, disposals and fixtures you keep on hand, are tracked one by one until they're installed.

For tax purposes, there are specific IRS rules for inventory and for materials and supplies, and your CPA decides which treatment your business uses on the return. IRS Publication 538 covers accounting methods, including inventories. Your monthly books usually follow the same method, and if they don't, your CPA needs to know.

Why truck stock makes monthly numbers swing

If every restock is expensed the day it's bought, your parts cost follows your buying, not your work. A month when you stock a new truck from scratch, or load up ahead of a busy season, looks like a bad month. The month after, when techs work through that stock and buy little, looks better than it was.

That swing doesn't matter much if truck stock is small and steady. It matters a lot if you're trying to read margins month to month or check your prices, because parts cost is one of the numbers your flat-rate price book is built on.

Tracking truck stock as an asset

With the asset method, restock purchases are recorded to an account such as Truck Stock Inventory, an other current asset, instead of to cost. At the end of each month or quarter, your techs count what's on each truck and in the shop, priced at what you paid. The count becomes the new asset balance, and the difference is the cost of parts used.

Say a shop starts the month with $12,000 of parts on its trucks and shelves, buys $9,000 of restocks during the month and counts $13,500 at month end. Parts used were $12,000 + $9,000 - $13,500 = $7,500. Expensing the restocks would have shown $9,000 of parts cost, $1,500 more than was actually used, because the trucks ended the month fuller than they started.

A count doesn't need to be perfect to be useful. A simple count sheet per truck, done the same way every time, is enough to keep the asset balance honest. Parts used then land in cost of goods sold, which our explainer on cost of goods sold walks through.

Water heaters, fixtures and other big-ticket items

Expensive items are worth tracking one by one, whichever method you use for small parts. A water heater bought for a specific job is simply coded to that job when the supply house invoice comes in. If you keep water heaters in stock, record each one at cost when it arrives and move it to the job it's installed on. A unit that sits in the shop for two months should show up as an asset, not as a cost in the month you bought it.

The same goes for anything bought for one job: a special-order fixture, a tankless unit, a long run of pipe for a repipe. Code the supply house invoice to the job on the ticket, the same routine we describe in job costing for electrical contractors.

Checking your flat-rate price book against real costs

Every price in a flat-rate book is built on assumptions: what the parts cost, how long the job takes and what an hour of labor costs you once payroll taxes, workers' comp and benefits are added. Supplier prices and wages change, so a price that covered everything last year may not now. The books are where you find out.

Say your price book lists a standard water heater swap at $1,800, built on $700 of equipment and parts and 3 hours of labor. Last month your techs did 10 of them, and the books show what they really took on average.

Each swap left $180 less than the price book planned for. Across 10 jobs, that's $1,800 in one month from one line in the book. Whether to raise the price, change the equipment you install or look at why the jobs ran long is your call. The books just make the gap visible.

This check only works if revenue, parts and labor are recorded by type of job. Revenue categories in your books should line up with the service types in your price book. Parts come from supply house invoices coded to jobs, plus parts used from truck stock where your techs record them on the ticket. Labor comes from hours by job in your time records.

Recording it, step by step

1. Pick the method for truck stock with your CPA: expense when bought, asset with counts, or a mix with big-ticket items tracked one by one.
2. Set up the accounts. A parts cost account in cost of goods sold, and, if you're using the asset method, a Truck Stock Inventory asset account.
3. Record restocks to cost or to the asset account, depending on the method, from each supply house invoice rather than the statement total.
4. Code job-specific purchases to the job, including water heaters and special-order fixtures.
5. Count on a schedule, monthly or quarterly, and record one adjusting entry so the asset balance matches the count.
6. Match supply house credits, including returns and manufacturer warranty credits, to the job or to truck stock, wherever the part came from.
7. Review margin by service type each month against the price book.

Mistakes we see most often

• Switching methods partway through the year. Months stop being comparable, and your CPA has to untangle it at year end.
• Expensing a water heater that's still in the shop. That month's costs look high and the next job looks unusually profitable.
• Counting once and never again. An asset balance that hasn't been counted in a year is a guess.
• Booking the supply house statement as one expense. Job-specific parts and truck stock end up mixed together.
• Pricing from memory. A price book that's never compared to the books drifts a little further every time suppliers raise prices.

Each month, and what to hand your CPA

Each month you should see parts cost that reflects what was used, a reconciled supply house statement, margin by service type next to your price book, and the truck stock balance if you track it. At year end, your CPA gets the method you used, the year-end count with how it was priced, and the list of big-ticket items still on hand. Those are the pieces they need to apply whichever tax treatment they decide on.

How we handle it

Our bookkeeping for plumbers runs in QuickBooks Online from your supply house invoices, field service reports, payroll and bank feeds. We agree on one truck stock method with you and your CPA, record your counts, code job-specific parts to their jobs and give you margin by service type every month, so you can see when the price book is drifting. It sits under our wider contractors and trades bookkeeping.

If your books are behind, we rebuild them from your statements and invoice history first. Plans start at $299 a month; any setup or catch-up fee is quoted up front. See our plumbing company bookkeeping page for how the monthly work runs.

Common questions

Should truck stock be inventory or an expense?

In your books, either can work if you use one method consistently. Expensing restocks is simpler, and tracking truck stock as an asset with regular counts gives truer monthly numbers when stock levels move around. How it's treated on your tax return is your CPA's decision.

How often should we count truck stock?

Monthly gives the truest monthly numbers, and quarterly is a common compromise. What matters most is counting the same way every time, on every truck and shelf, priced at what you paid. We record one adjusting entry after each count.

How do I know if my flat-rate prices are too low?

Compare what each type of job actually cost in parts and labor, at a loaded labor rate, with what the price book assumed. If the money left over for overhead and profit keeps coming in under plan, the price book has drifted. That check needs revenue, parts and hours recorded by type of job.

Do you track water heaters by job?

Yes. A water heater bought for a job is coded to that job, and units you keep in stock are recorded as an asset until they're installed. See our bookkeeping for plumbers page for the rest of the monthly routine.