Warranty Parts vs Billable Parts: How to Track Each

To differentiate and track warranty parts versus billable parts, it's essential to have a clear understanding of the rules surrounding manufacturer warranties, associated costs, and proper documentation. As HVAC contractors, accurately tracking these transactions is crucial for accounting and tax purposes. For the bigger picture, see our guide to hvac contractor expense management software.

Warranty Parts vs Billable Parts

For accurate tracking and financial reporting, it's essential to understand the difference between warranty parts and billable parts. Warranty parts are covered by a manufacturer's warranty, typically lasting 10 years or longer for registered residential HVAC equipment. Some brands, like Daikin, offer longer terms for their ductless systems, up to 12 years.

On the other hand, billable parts are typically used for repairs or replacements not covered by the manufacturer's warranty. These parts are usually obtained through unauthorized channels, DIY installations, or using non-OEM parts. Many brands allow warranty transfer to a subsequent homeowner, often with an application and fee within a set window after the sale. Transferred coverage may be shorter than the original owner's.

To track warranty parts versus billable parts, follow these guidelines:

• If a part is covered by a manufacturer's warranty, mark it as warranty part.
• If a part is not covered by a warranty, mark it as billable part.
• Document the part and its cost, including any applicable fees for transfer or other services.
• Keep accurate records of warranty claims and parts purchases to ensure proper financial reporting and potential reimbursements.

Understanding Manufacturer's Warranty and Labor Costs

Warranty Parts vs Billable Parts

Understanding Manufacturer's Warranty and Labor Costs

Manufacturer parts warranties generally do not cover labor costs associated with diagnosing and replacing a part. This is a common point of confusion and can result in significant out-of-pocket expenses if a separate labor warranty or extended plan is not in place.

Businesses can elect to treat repair and maintenance costs as capital expenditures if they are paid in carrying on a trade or business and treated as such on their books. This election is made annually. Businesses must keep accurate records of repair and maintenance costs, including receipts, invoices, and labor time.

However, if they choose to treat the repair costs as labor, they must report the repair as a separate expense and deduct the labor costs from their tax return.

It is essential for small HVAC contractors to understand the rules around warranty parts and billable parts to ensure accurate financial reporting and maximize potential reimbursements.

Documenting Warranty Claims and Tracking Parts

Most manufacturers require proof of annual professional maintenance to keep warranties valid. Failure to document this can lead to denied claims. To avoid this, it's essential to track warranty parts and billable parts separately.

Tracking Warranty Parts

Warranty parts are typically covered by the manufacturer's warranty for a specific period, usually 1-5 years, depending on the product and manufacturer. To track warranty parts, owners and office managers should maintain a record of all parts issued, including:

• Part number and model
• Date of issuance
• Reason for issuance (e.g., repair, replacement)
• Date of replacement (if applicable)

The tracking period for warranty parts is usually 2-5 years, as specified by the manufacturer. If a part is no longer under warranty after this period, it should be documented as "no longer under warranty."

Documenting Warranty Claims

To document warranty claims, owners and office managers should:

* Keep a record of all warranty claims, including: + Part number and model + Date of claim + Description of the claim + Reason for the claim * Note the labor cost associated with the claim (if applicable) * Update the warranty claim status to "in progress" or "resolved" as soon as possible * Follow up with the manufacturer to confirm the warranty claim status and any outstanding costs

By tracking warranty parts and documenting warranty claims, owners and office managers can ensure proper financial reporting and maximize potential reimbursements.

Maximizing Potential Reimbursements and Financial Reporting

To maximize potential reimbursements and financial reporting, it's essential to accurately track warranty parts versus billable parts. Here's how to do it:

• Identify warranty parts: Keep a separate list of warranty parts, including the date of purchase, part number, and description. Make sure to document the condition of the parts at the time of purchase.
• Document warranty claims: When a warranty claim is made, document the claim in the company's workflow management system or a separate document. Include the date of purchase, part number, and description of the claim.
• Track labor costs: When a warranty claim is approved, track the labor costs associated with the repair. Keep a record of the labor hours worked, including the date, technician name, and labor rate.
• Calculate reimbursement: Based on the documentation, calculate the reimbursement amount for warranty parts and labor costs. Ensure that the reimbursement amount is accurate and in compliance with manufacturer's policies.
• Verify reimbursement: Before submitting reimbursement claims to the manufacturer, verify the accuracy of the documentation and calculations. Check with the manufacturer to ensure that the reimbursement amount is correct and compliant with their policies.
• Review and adjust: Regularly review and adjust the warranty and labor tracking process to ensure accuracy and compliance. Identify areas for improvement and implement changes to optimize the process.

Oregon and Colorado's Parting Laws and Regulations

Warranty Parts vs Billable Parts

| Header Row | | --- | | Understanding Warranty Parts and Billable Parts | | Warranty Parts vs Billable Parts |

Oregon and Colorado have laws restricting "parts pairing" for equipment manufactured and sold after specific dates in 2025 and 2026. These laws aim to prevent manufacturers from unfairly shifting costs to consumers by pairing parts from multiple models.

For example, if an HVAC contractor installs a new furnace in 2026, the manufacturer will not be able to pair it with a 2025 model, even if it's identical. This means the contractor must keep track of which parts are covered by the warranty and which are billable.

The rules vary by state, but here's what's known:

• In 2025, Oregon and Colorado restrict parts pairing for equipment manufactured after July 1, 2025.
• The laws do not apply to parts that are specifically recommended by the manufacturer for use with a particular equipment model.

This includes documenting the date of installation, the part number, and any relevant instructions or recommendations from the manufacturer. By following these guidelines, contractors can ensure they're properly tracking warranty parts and maximizing potential reimbursements.

Tax rules, limits and rates change. Confirm current figures with the IRS or your accountant before you file.