Small Tool Tracking: Best Practices to Implement in Your Business

11 min

Have you ever lost track of any of these tools in the past?

  • The pen you got last week from a client.
  • The box cutter you saw yesterday lying around somewhere.
  • Important equipment replacement parts that you somehow need urgently.
  • Anything smaller than your palm that drove you crazy searching for it.

You’re not alone. Below, users of the Grassroots Motorsports forum are sharing experienced about the tools they lose all the time.

Grassroots Motorsports forum It’s frustrating to lose track of small tools whenever you need to get work done.

Businesses of all sizes and industries face this problem and while it may seem trivial at first, the time lost from locating small tools adds up quickly over time.

If you’re spending just 10 minutes a day to find nuts and bolts, you lose close to 40 hours of work which could’ve been spent better on important tasks—that’s without factoring the time wasted by your employees.

This alone is a strong enough reason why your business should pay attention to tracking small tools as soon as possible. Learn how to do it the right way as we move ahead in this guide.

The Cost of Failing to Track Small Tools

We’ve established it’s expensive to waste money and time on tracking small tools. The question is, where does the bulk of the losses come from?


The average business loses anywhere between $10,000 to millions of dollars for every hour of downtime which is unacceptable.

Even successful organizations are susceptible to downtime and if they don’t recover, bankruptcy is almost always the expected outcome.

Consider the tight margins in markets today due to fierce competition and the uncertain economy—can your business suffer from downtime and survive in the long run?

Time spent on unproductive work like looking for small tools is essentially throwing money away. 

The hours you lost could have been spent on meeting deliverables, generating and securing sales, and so forth. In the U.S., businesses lose $650 billion every year to poor productivity and you can bet the failure to track small tools is one of the contributors to this epidemic.

Downtime can even be caused by external factors.

An urgent restock you placed with your regular supplier could be delayed, affecting your business. However, the vast majority of rush orders do come from poor planning from the buyer side like realizing a project lacks the required tools.

Tracking small tools and other assets would have prevented the problem from happening in the first place.

Unnecessary Expenditure 

Small tools are often neglected because they seem insignificant in terms of cost. Buying a box of pens for your office to replace the ones that went missing is not as expensive as say, buying a new tractor—that is until you look at the cost over time.

A box of pens at $10 each bought every month adds up to a staggering $1,200 a year. Add up the costs for other small tools and you’re looking at tens of thousands in non-essential expenditure.

An HBR study in 2015 described how a company rejected a manager’s request to buy an $8,000 crane that was necessary for a project.

The same company had no issues allowing each business department to spend up to $10,000 on stationery, summing up the problem most businesses face.

Companies may have the mentality of ‘let’s order more than what we need’. But keep in mind that there is a fine line between safety stock and hoarding. Those that don’t understand their operations struggle with the latter which bloats their expenses.

Look around your office now and try to spot anything you’ve bought but have not used in the last few months.

You’ll be surprised at how much money is wasted on unimportant tools even if you think your organization’s spending is planned to a tee.

Your budget will continue to bleed from this until a complete small tool tracking system is deployed.

Theft, Replacements, and Missing Tools

Contrary to popular belief, the bulk of tool costs come from replacements rather than new purchases.

Businesses are more conscious when buying new products compared to replacing existing ones although they cost the same. 

In fact, replacements could be more expensive if the tool is no longer in production or bought in bulk to stay ‘safe’ as mentioned above.

So, what causes businesses to replace their small tools?

Theft is a big reason why tools are lost all the time since they’re not as easy to spot and it will take a while before you realize they’re gone.

Even if you identify the suspect, he or she can say it’s someone else’s fault since it’s impossible to prove they’re in the wrong. It’s an age-old, billion-dollar problem that cannot be tackled effectively without a tracking system.

Misplaced tools can deceive businesses into buying components they already have but cannot find. Tools may also go missing if they’re not placed back where they belong.

As they’re cheap, small tool purchases are often written off by organizations not knowing it’s leaving a massive dent in their budgets.

Reckless spending ultimately leads to wasted storage spaces which should be avoided at all costs due to rising warehousing costs.

Going back to the hoarding point mentioned earlier, employees waste time recovering tools from selfish team members who hold them ‘just in case’ they need it.

The truth is, people who hoard tools don’t use it frequently enough to justify their behavior. The time spent chasing tools and identifying who’s using what is nowhere near worthwhile to companies nor employees.

So, to avoid unnecessary downtime, expenditures, and collaboration issues, here are some best tips and practices for tracking small tools you can use. 

6 Small Tools Tracking Tips to Implement in Your Business

1. Deploy Technology

Technology drives success in every business area, and it’s revolutionizing asset tracking.

You can deploy scanners to track not only where a tool is, but also who’s using it and how long its lifespan is before a replacement is needed.

The easiest way to start is to use unique serial identifiers for every tool you have. Barcodes, QR codes, and serial numbers are examples of popular identifiers that track assets efficiently.

Tools that are too small to be scanned (e.g. nails, screws, pins) can be tagged in batches instead, like a container of 100 screws.

Tagging everything in your inventory does take a considerable amount of time.

However, the resources you save down the line from not having to count parts and pieces by hand is more valuable than the initial time sink.

This benefit extends across your entire company and production line, further boosting the value gained from tracking small tools.

A common misconception is that tagged items have to be scanned with bulky devices you see in TV ads of yesteryear—that’s no longer true.

Today’s tracking systems integrate with mobile devices so employees can track assets from the comforts of their smartphones.

Most providers also sync tracked data in the cloud which eliminates the need for workers to enter or extract asset information manually.

As asset information can be accessed in real-time anywhere, anytime, employees can check the tools currently in use and plan their schedule to avoid clashes when booking equipment.

Advanced tracking systems are most effective in businesses with large inventories.

Imagine you own a factory with over 10,000 tools moving in and out every day. It would be impossible to track every movement without technology, let alone bearing the expensive costs of manual labor.

In general, the more tools you have, the more valuable asset tracking will be to your organization resources-wise.

Since technology eases asset tracking for large inventories, it is a lot easier for your business to scale by allowing you to expand your offerings to meet evolving market demands.

Your customers will be thrilled by your organization’s ability to deliver a wide variety of solutions with minimal disruption thanks to effective asset management—and who doesn’t want happy customers in their business?

2. Make Use of The Data You Have

It’s common for businesses to delay projects as a result of tool shortages.

Perhaps you misjudged the number of tools needed for your on-site team or maybe several tool packages got lost in transit.

Asset tracking software prevents this issue by tracking tools in real-time. 

But, it can also be used to make informed business decisions ahead of time, also known as predictive maintenance.

The evolution of predictive maintenance in businesses:

predictive maintenance for small tool tracking
A big part of asset management is knowing when to replace tools or buy new ones to boost work productivity. Without data, you’d have to rely on guesswork which can be debilitating if you make a mistake.

Asset tracking software is a lifesaver since most providers offer features and insights that enable you to make the right calls. 

For instance, you can identify the ideal reorder point and safety stock based on the data gathered from your company’s small tools usage.

As soon as the thresholds are met, you’ll be automatically notified to take action. More advanced tools can even make the orders themselves so there’s less manual work on your end.

That’s not all you get with predictive maintenance.

Here’s a common scenario.

You’re working on a massive project and you somehow run out of tools. The last thing you want is to spend more on tools but work needs to be done. Reorder alerts prevent this sticky situation of not having enough assets and paying extra for rush orders that thin out profit margins.

Your clients will be happy, your team won’t be stressed out, and your revenue won’t suffer—a win-win for everyone involved.

Insightful data also helps you decide between repairs and replacements. 

Every tool has its specific lifespan but knowing when a tool is out of favor is challenging. 

By using information from your asset tracking system, you can identify when a tool is no longer effective at performing its task or if it needs to be repaired, saving your company money unnecessary expenditure.

You may think that small tools are not worth repairing since they’re cheap to replace—but that’s not true.

Certain tools like drill bits can go up to hundreds and even thousands of dollars if they’re specialized parts. Repairs often cost a fraction of the purchase price so it makes sense to opt for the cheaper alternative whenever possible.

Cutting down on excessive expenses by working lean is another essential practice for businesses in every industry. When a job is done, you can look at back your usage data to determine which tools deliver the most value and vice versa.

This knowledge will help you come up with better tool estimates in the future in addition to only working with the right assets, saving you money in procurement, transport, and storage costs.

3. Foster Accountability

Technology is great on its own although you also need the cooperation of employees to make small tools tracking effective.

Team members still need to be responsible for certain activities—like putting tools back to their respective storages—since processes can only be automated to a certain extent.

One way to achieve this is by building a culture of accountability in your organization.

For example, you can discipline employees who fail to return used tools or damage company equipment without a valid justification.

A penalty system can compel team members to be more accountable at work although care should be taken to not impose overly harsh penalties.

A slap on the wrist is fine; anything more than a telling-off or a minor fine is only going to bring more problems than benefits.

Accountability does not only fall on your employees’ shoulders. It is also your (if you are a business owner or a manager) job to create an obedient workplace culture, and that begins by implementing adequate work procedures and systems.

A simple in-out scanning system for tools will do wonders for tracking assets since you’ll know the first and last person that used an asset. 

This combats theft as well since you can track a tool’s usage history to deduce vital information.

Business leaders should also demonstrate admirable traits in their leadership. Being honest, owning up to mistakes, caring about others—these are qualities you should embrace if you want your employees to be accountable.

Proper leadership fosters a culture of responsibility across the organization which indirectly influences how workers handle company assets, thus combating theft, misplaced tools, and mismanagement.

4. Develop and Implement Effective Standard Operating Procedures

Standard operating procedures (SOP) for company equipment is an industry-standard because it provides structure to asset management.

It’s easy for employees to comply with company rules if you lay out clear steps for them to do so. Designing coherent and effective SOPs, however, is where companies struggle.

It’s well known that explaining ‘why’ over ‘what’ is the ideal approach to take when proposing an idea.

When you develop an SOP for small tools or any asset for that matter, focus less on what the tool does. Instead, explain why it’s important to use them the right way.

For instance, you can explain how excessive spending on small tools can decrease profit margins which then affects salaries and bonuses.

Good SOPs also ease operations instead of slowing down work. We’ve all been through experiences where a checklist or workflow is so extensive that no work gets done at all!

Unless you’re building rockets, your SOPs should not be longer than a page, two at most. Here’s an informative guide on structuring effective SOPs to read in your spare time.

Alternatively, you can check some ready-made SOP templates on TemplateLab and download them.

SOP for small tool tracking
Source: TemplateLab

Your SOP can include equipment sign out forms for expensive small tools or those limited in quantity. Employees then must sign the form when a tool is moved out of inventory and again when it is returned at the end of the day.

However, only use sign out forms for valuable assets. Using it for every single small tool is not only a waste of time, but it will also hassle workers so much that they would rather ignore the form.

Checklists can be used to complement sign out forms when moderating the usage of small tools in your business.

Some key points you can include in your tool checklist are:

  • What tool(s) was taken?
  • How many hours or days will the tool be used for?
  • Which department or specific team members will be using the tools?
  • Are all tools in good condition?
  • Are all tools kept back where they belong?
  • Has the work site been checked and cleared of company equipment?

Employees who want to use tools for work should complete before and after checklists to make sure they return in pristine condition.

5. Categorize Your Tools

Your company is likely to have hundreds of different small tools, each with their uses. Organization is important here since you’re not only tracking tools by their type, but also by its function at work.

When organizing tools in your inventory, take inspiration from how libraries store books—that is creating a logical structure for convenient search and retrieval.

You can start by dividing tools by the domain of work they are used in. For example, screws and nails are kept together while tapes and wires are stored in a separate section.

Then, sort them by their usage frequency. Commonly used tools are to be kept in easier to access spaces like the first five shelves.

You can even create two distinct storage areas for small tools, one for common assets and the other for rarely used ones.

Some companies have experienced success organizing small tools à la supermarkets where each row corresponds to a certain work function.

Alphabetical storage systems can also be used but they’re more useful for large inventories. However, most tracking systems already offer alphabetical sorting in their applications so it may be redundant to deploy this technique.

Another common strategy is to separate your tools by employees, departments, or projects. This system is extra effective if your company works with multiple clients or if only a specific group of employees use tools in their work. 

YouTube video
Source: GoCodes on YouTube

Regardless of the technique you use, consult your team members first to determine which system works best for them. You don’t want to spend tens of thousands categorizing your tools only for it to make life harder for your employees.

6. Secure Your Small Tools

Organization and technology form a good foundation for the security of your small tools, but it’s not enough.

Physical security is still necessary particularly for valuable tools like equipment parts and components containing rare metals.

Every tool container should be locked and stored in secure storage.

If your tools are worth a sizable amount of money, you may consider adding additional security, such as teams overlooking sites throughout the day. Surveillance can be installed around points of interest as well to bolster security along with alarms.

Security efforts should also be centered around your workers as the majority of thefts come from offenders within the business rather than unrelated individuals.

75% of all business theft comes from employees, with organizations losing just shy of $50 billion a year to this problem.

The best way to secure your business internally is by, again, establishing a culture of security-first among employees.

You can issue severe fines and pursue legal proceedings to further deter employees from stealing tools and impacting your bottom line.

Start Tracking Your Company’s Small Tools Today

The cost of small tools seems insignificant at first sight. However, they can add up over time and affect your margins if left unmanaged.

Using the right technology, instilling a culture of accountability in your company, and implementing effective work processes are several best practices you can implement today to track small tools effectively and stop your company from taking on unnecessary expenses.

About GoCodes

GoCodes is the industry leader in tool tracking. We provide customers with the ultimate single vendor solution that includes cloud-based software, top-rated smartphone scanner apps and rugged QR code tags.

We pride ourselves on delivering a personalized service, cutting-edge technology and software that is easily used by your entire team.

GoCodes ensures our customers achieve success in their tool management projects every time.

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