Bookkeeper for HVAC Companies

How should I split my revenue in the books?

Separate the three things an HVAC company sells into three revenue accounts: service and repair, installs, and maintenance. Each one prices differently, is billed differently, and lands in your bank account on a different schedule. If they share one revenue line, you know how much cash came in, but not which part of the business actually paid for the overhead.

A repair visit closes out in a day and gets invoiced in that day. An installment carries equipment, parts, deposits, and sometimes progress payments across a week. A maintenance agreement is paid in advance for work you have not done yet. These are different animals, and a P&L that lumps them together cannot tell you whether you are running a repair shop that also sells equipment or an install business that keeps the lights on with service calls.

• Service and repair calls: diagnostics, part replacements, and hourly or flat rate labor.
• Replacement and installs: equipment, materials, and crew time for the project.
• Maintenance agreements: membership or contract amounts, recognized as you perform the work.

Some shops add a fourth line for financing fees or extended warranty sales. The point is not to build a chart of a hundred accounts. It is to make sure these three business models stay visible on the same report.

What do I do with maintenance agreement money?

When a customer pays for a year of maintenance up front, the cash is in your bank, but the bookkeeping treats it as a liability, not revenue. You move a portion of it into revenue each month as the contract is performed. That is what accountants call deferred revenue.

If you record the whole payment in the single month it arrives, one month looks like you had a windfall and the other eleven show nothing. The P&L stops being a usable report. Cash basis accounting on paper, especially for a shop that sells annual contracts, can confirm a sales spike that is not matched by any months later.

The way the deferred part lands in revenue depends on the contract. Some shops recognize a flat one-twelfth of the payment every month. Others recognize at the time each scheduled service visit happens. The mechanic is what matters: the money gets recorded as earned when you perform the work, not handed him earlier.

Where does owner pay go on the P&L?

Owner pay needs to appear in two places: the hours you spend in the field as a technician belong to the cost of that job, and the time you spend running the business belongs in overhead. If you put all of it in overhead, the cost of your own field time disappears from the job. And putting all of it in direct labor makes the cost base for every job look bigger, which is why the mix refuses to meet.

For most owner-run HVAC companies the owner works as the top tech and the dispatcher and the estimator and the person taking after-hours calls. The books have to separate those roles. The wage for the management role belongs in overhead. The hours on a truck belong to those jobs, then your prices are built on a false low number.

If the company is structured as an S-corporation, the IRS expects you to take a reasonable W-2 salary. Industry benchmarks, like the ones compiled by Profitability Partners, give there are common ranges based on company size.

Those are not legal fixed numbers. They are what the industry survey found. The rule is that the salary has to look reasonable for a manager doing what you actually do, because a common split puts 40 to 50% of the owner's total comp in salary and the rest as distributions. But a tax expert is the one to pin that down.

What should count as a real job cost?

A job cost is any dollar that would not exist if that customer did not call you: the part you install, the hours the tech spends on the rooftop, the permit fee, the delivery charge, the disposal fee. Everything else that keeps the shop running, the rent, the insurance, the blanket the techs, is overhead.

The line starts to smell on installs. A replacement with $3,400 in parts and about $5,000 to $6,000 of labor markup is a normal shape for a job in the $8,500 to $10,000 range. If those parts get put into the ledger under a generic materials account without being matched to a specific job, the job-level profit disappears. You know you hit the month, but you do not know whether the smart unit came in lighter than the other job. That's the answer you need from job costing.

The discipline is simple on the invoice side: tags all parts to a customer and a job number, and tag all tech on that job and a labor line. Repairs that are a single call should get the same treatment. It is the kind of dies that only a bookkeeper looking at the field service report, not just the bank feed, can build.

What is unapplied labor and why does it matter?

Unapplied labor is the paid tech time that is not billed to a customer job: waiting for a part, driving back to the shop, stacking a warehouse, a return trip that costs you and gets no invoice. It is real money paid out every week, and the books have to separate it from direct labor.

When unapplied hours get folded into direct labor, every single job you quote looks more expensive than it actually is, and the true cost of getting a tech ready for the field gets hidden. When they get dropped into overhead, the hourly rate and the price are falling.

The useful move is to keep a small line of its own, something like work or reserve labor in the cost of goods section. Then you can see it month to month. Some unapplied time is fine. A technician on dispatch with a full truck has a little dead time. It is usually. If that line is bumping monthly, the owners still need to ask whether the crew is overstaffed or the stock ordering process is eating the jobs.

What should I be looking at each month?

The three reports that matter are the profit and loss broken out by your service lines, the unapplied labor line from the direct cost section, and your list of open jobs against their estimated materials. Those been there could be tracked: what is the margin holding on each service, where did the technology go, and what do the jobs about to invoice look like.

Gross margin in the range of 50 to 55% is a target that ServiceTitan and other field service software data suppliers have repeated enough to become the benchmark. Some meaning remaining overprice margin from what the install cost even, the target works. If your overall margin is lower, the next close the large revenue line to see if repair pricing has kept up with the cost of the techs you pay. That is a pricing decision, not a subtle one.

• Gross profit per service line tells you whether the margin is coming around the repairs or the pickup at the installs.
• Unapplied labor tells you whether full-time techs are actually turning their hours into net conditions.
• Open job costing tells you whether the remaining work on what is an in-progress install or emergency job still carries a healthy margin.

The P&L is really a pricing and hiring tool. Owners who let the bookkeeping tell them these numbers are often the ones who know in March whether they are already on track for the summer.