Tools and small equipment are the working kit: hand tools, power tools, meters, ladders, small machines.
Expensed or capitalised
Below a threshold your accountant sets, tools are expensed in the period bought. Above it, they become an asset and are depreciated across the years they are used.
The threshold varies by region and by policy. What matters practically is that a large equipment purchase does not hit the profit and loss all at once, and a box of hand tools does.
Why it is consistently under-budgeted
Tools are bought reactively — when one breaks, when a job needs something, when a new technician starts. Each purchase is small and unremarkable, and the annual total is routinely several times what an owner would guess.
Two habits fix it. Look at the annual figure rather than the individual purchases, and budget for replacement rather than treating each one as an unexpected event.
Tools and rework
Under-tooling is expensive in a way that does not show up as a tool cost. A technician without the right tool does the job slower, does it twice, or does not do it at all that visit — see callbacks and return visits, where a second visit usually consumes the whole margin on the job.
The cost of the tool is almost always smaller than the cost of the visit it prevents.
Tracking what you own
Larger items are worth recording with their purchase date and cost, for insurance, for your accounts, and for replacement planning — see devices. Equipment fails in clusters because it was bought in clusters.