Covering Warranty as an Overhead Cost

NSCA executive director Chuck Wilson discusses whether to cover warranty cost under an individual project or as overhead.

CI Staff

In his latest video question of the week, NSCA Executive Director Chuck Wilson answers a seemingly small but pivotal question:

Is covering warranty a cost associated with an individual project, or is that overhead?

Wilson suggests carrying out the warranty as an overhead cost. This will help close the project out sooner. It may be unpredictable to use a percentage of time on the job as the line item for a warranty, and having warranty reserve as an overhead line item will help you monitor this cost over time.

Wilson also warns to watch for extended product warranties from manufacturers. Clients may hear about product warranties and assume the integrator’s installation or project is covered under a similar timeframe of five year, ten year, perhaps even lifetime warranties. It is important to make sure your warranties are spelled out very clearly in proposals and contracts.

He also speaks about not charging training as a warranty issue.

Watch Chuck Wilson’s video question of the week to learn more:

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