How Are You Managing Your Bulk Inventory Versus Serialized Rental Equipment?

Arielle Cox

Most rental companies deal with two different types of rental equipment: bulk assets and serialized assets. Serialized equipment refers to specific items that bear an identifying serial number, such as heavy machinery, attachments, or power tools. Bulk equipment, or non-serialized assets, tend to be purchased in larger quantities and rented out in quantities and do not bear a specific unitized number. Common examples of bulk assets include air hoses, spreader bars for trenching equipment, electrical cables, extension cords, suction hoses, and scaffolding.

Serialized assets are typically more expensive than bulk items and need more thorough tracking throughout their lifecycle. However, the specific way(s) you want to manage these inventory items will depend on your unique business model.

Jeff Loomis, InTempo’s Director of Business Development, shares some of his recommendations below:

Setting a Threshold for Serializing Equipment

It’s easy enough to track large machinery that comes with a manufacturer-issued serial number. When creating the new asset in your inventory, add the pre-assigned serial number along with the other identifying information, such as make, model, and category and class, to track the unit throughout its rental lifecycle.

Non-serialized items can also be tracked; however, companies must determine when and how to do so. For some organizations, setting a dollar threshold (i.e., less than $2,500) is the most straightforward way to approach this; anything over that limit will need to have an assigned identification number and tracked on its own. Smaller startups, however, may want tighter controls for their entire inventory.

“Expensing” Bulk Assets Moved from Merchandise to Rentable Equipment

In some cases, you may purchase certain bulk assets with the intent to sell them outright but then transfer them to rental assets based on customer demand. In this situation, you may then want to “expense” these bulk items. By creating a sales-to-rental transfer, you can move them from your merchandise inventory to your rental inventory, creating a bulk lot. This will have a category and class assigned to it, letting you assign the items to rental quotes/reservations, depreciate them over time, and – if needed – transfer them from one location to another – much like you would when you manage your serialized inventory.

Depreciating Bulk and Serialized Equipment Over Different Time Periods

Assets are depreciated over their useful life because they don’t last forever and their value declines over time. Depreciation spreads out an asset's cost over time, providing a more accurate picture of a company’s finances. At the end of its useful life, the value is zero on your books, but you can still sell the asset for some revenue. If you sell it for $1,000, that’s a 100% gain realized.

Sometimes, when it comes to bulk equipment, it’s a smart strategy to spread the financial expense over time by transferring some of the items into inventory and allowing them to depreciate over a short period of time. For instance, if you tie up several thousand dollars in expensive discharge hoses or scaffolding pieces, instead of taking the full hit at the time of purchase, you can transfer some of them into your rental inventory and spread out the depreciation over a 12-to-36-month period. Instead of taking a large hit in one month – in turn, spiking your expenses and impacting your financials – you can find a way to spread the expense over time. Tracking depreciation allows companies to replace future assets using the appropriate amount of revenue. The process enables companies to cover the total cost of an asset over its lifespan instead of immediately recovering the purchase cost.

This strategy tends to make the most sense for large volumes of bulk items. A five-figure purchase, for instance, may benefit more from bulk depreciation than a small order of a few hundred-dollar hoses.

That said – not all rental software can accommodate bulk depreciation. You’ll generally need a specific unit number for those items, and you’ll need to track which “lots” have been in your inventory the longest (and, therefore, have depreciated the most).

Generally speaking, you’ll want to sell or transfer the items that will first give you the most considerable gain. You can use two different strategies here:

• FIFO – First In, First Out
• LIFO – Last In, First Out

Lots are unique numbers for the quantities you moved into your inventory for that particular year and month. They can be historical. So, if something was moved in January, February, and March, you would have a unique lot each month. This is important for knowing how many items you have that are still depreciating. When selling inventory that is associated with a bulk lot, the system will always pull from the oldest lot using FIFO. This will give you the greatest return since the oldest lot will have the most depreciation. When transferring inventory that is associated with a bulk lot to another location, the system uses LIFO and reduces the quantities in your location and automatically creates a new lot for the value of inventory at the new location.

One Solution for Bulk and Serialized Rental Inventory

InTempo Enterprise gives you everything you need to manage your entire rental inventory on a single platform. Easily accommodate the business process you already have in place or let our team of industry experts help you refine your processes for more efficient workflows.

Want to see it in action? Schedule a call and we’ll walk you through any questions you have about managing your bulk and serialized equipment.