April 24, 2023
Is Maintenance An Operating Expense?
When I saw this question while researching blog topics, I was momentarily taken aback. To me—and maybe most people—the answer was quite obvious.
Then I started thinking about it and what I've seen not only at my current employer but at previous companies. I remembered how so many coworkers seemingly dismissed these particular jobs. Mowing, trimming, plowing, vacuuming, restroom attention—it's all maintenance, much of it preventive maintenance. However, workers are being paid for the job which comes from a company's operating capital.
Let's break down those maintenance operating expenses into four categories, then conduct an experiment.
Both equipment and non-equipment need preventive maintenance. Is maintenance an operating expense? Do you pay a mechanic for oil changes and tire rotations? Even if you do it yourself, you're buying supplies.
Check your city for how many HVAC companies service homes and businesses with annual inspections. Property managers send in pest control, hire lawn care providers, contract for parking lot plowing, walkway deicing, and crews for after-storm cleanup duties.
Parts/tools/supplies cost. Filters, lubricants, cleaners, and a whole host of other items.
For companies with a stockroom, floor space is an expense. The area also has expenses in the form of heating/cooling/ventilation/lighting. Even the shelves and cabinets where inventory is stored are an expense. Forklifts for pallet moving need charging and maintenance.
Some inventory becomes a 'hidden' expense if A) you've purchased too much of something that is rarely used and B) items are still around even though the equipment they were used for isn't around any longer.
One of the major expenses in any company. Maintenance workers may love their jobs, but they ain't doing it for free.
Labor expense affects and is affected by the previous two points. Regarding assets, if proper equipment care isn't done, maintenance spends more time and materials to get it back to working order. Some equipment needs constant attention because regulators require them to operate at a certain level.
Inventory affects labor especially when quantities are short. And when workers spend too much 'search time' that cuts into 'wrench time.'
Labor expenses accumulate in other ways. For instance, unexpected delays. They happen. Flat tire on the truck, accident, traffic delays, weather delays, illness.
Another expense is when the work takes longer to complete than estimated. It happens. However, on the other side, there is the expense of finishing early and the worker wasting time before the next job. Again, it happens. Supervisors aren't getting the most out of workers at those times. No, they don't want them overloaded but do want their best performance.
Well, this is a fairly obvious expense. Maintenance uses inventory, so at some point, inventory must be purchased. However, within this are areas for expense examination.
Is anyone authorizing purchases or are they just made because someone requisitioned something or 'we've always bought this?'
What are the lead time and on-time delivery for vendors? Delays mean more expense in lost production.
We all cringe at the shipping/handling charges. They can be a major percentage of the total cost. And they're attached to each purchase order. Saving expenses in this area include 'blanket purchase orders,' buying several items at a time from individual businesses on a regular basis Could be weekly, monthly, etc. Instead of finding all those stock items each time, put those items into a blanket purchase order and draw from that list.
Time to use your imagination and think about a world without maintenance or preventive maintenance. Can you do it? If maintenance is an expense, let's eliminate it from the workplace and our lives. What happens? One answer is found at the New York Daily News. Granted, the incident took place almost sixty years ago but review the list of maintenance near the beginning of this discussion.
No mowing or trimming and the property deteriorates, attracting rodents and insects.
No pest control and you have health issues.
No inspections mean equipment breaks down faster and doesn't last as long.
Safety issues arise.
You'd have to supply your own office trash bags and restroom supplies.
Because maintenance isn't done, companies suffer fines from auditors/regulators and spend extra money constantly buying new equipment.
In some companies, there is a 'butting of heads' between production and maintenance. While production takes the edge because they put out the product that fuels the income, one can't completely ignore maintenance. They must work together or…you guessed it. More expense.
While maintenance is an operating expense, costs can be controlled better. The solution is a computerized maintenance management system. With proper usage, the system will not only reduce expenses but ease the rumbling from the production side.
Assets – With asset management, a CMMS records readings and generates reports to keep the auditors smiling. Production is happier because preventive maintenance is scheduled, and even those pesky repairs become easier with checklists and safety procedures.
Inventory – A CMMS helps with inventory management through quantity tracking, stockroom layout, and an issue/return policy.
Labor is monitored through on-time compliance and attainment reports.
Purchasing through a CMMS is processed easier with vendor information, lead time, and delivery time percentages. Blanket purchase orders through the system are a great benefit. Maintenance departments see cost reduction and increased productivity, both measurable.
Yes, maintenance is an operating expense. It's a necessary expense to keep other expenses from skyrocketing, to keep employees healthy and safe, and extends asset life. Again, imagine if maintenance people suddenly weren't around. Maybe you wouldn't notice anything amiss after a day or two but after a week? A month?
With a CMMS working for maintenance, these expenses are controlled. Mapcon Technologies has been reducing company expenses for over forty years with a powerful, easy-to-use, and full-featured CMMS. Calling 800-922-4336 won't cost you anything. Scheduling a free demonstration won't cost you anything but several quality minutes of time. When you invest in MAPCON, you soon will find those operating expenses at a manageable level.