DallasFt. Worth, TX

  • 1.  Accruing costs for warranty work

    Posted yesterday

    We're evaluating more effective ways to account for warranty-related costs and would appreciate insight into best practices others may be using.

    Currently, we maintain a separate warranty job/cost code, and any warranty work performed after the original project has been closed is charged directly to that job. The challenge with this approach is that 100% of the warranty expense is recognized immediately as a company overhead cost, rather than being matched against the revenue of the original projects.

    We're exploring whether there are better methods for accruing or reserving for anticipated warranty costs throughout the life of a project-potentially through estimated warranty reserves, percentage-based accruals, or other accounting treatments.

    For those in construction or project-based industries, how are you handling warranty accruals and post-close warranty expenses? Any recommendations, lessons learned, or accounting best practices would be greatly appreciated.



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    Paige Fagan
    Accounting Controller
    All Tech Electric, LLC
    Lewisville TX
    (940) 910-7441
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  • 2.  RE: Accruing costs for warranty work

    Posted 13 hours ago

    We only "totally" close a job when we go through our year-end process.  So warranty work can be charged to the job throughout the year.  Example if we complete a job in February, it may be technically closed, but we can still charge warranty work to the job throughout the year to a Warranty cost code.   We also have a warranty job setup to handle any warranty work that may arise from a job that completed in a prior year.    Any costs to a warranty cost code or the warranty job is evaluated at the end of each quarter.  Anything significant is discussed with our Leadership Team.

     

    We do include a warranty reserve in our estimating process.  But it is coded as a labor in our official budget.  We don't want the field to see what that number is, as our goal is to have $0 warranty costs.  We typically don't have a big issue with costs of warranty work.

     

    Hope this helps Paige.

     

    Sincerely,                                                                            

    Carolyn Brister, CFO

    Momentum Mechanical, Inc.

     

    The address of our Beautiful,New,Facility is:

    136 Harmon Road  Hurst, TX  76053

    817-624-0024 Office     817-846-6476 Cell

    cbrister@momentummechanical.com

     

     

     

     




    Original Message


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