Solar installer bookkeeping: milestones and dealer fees

A solar installation is a long job pretending to be a short one. The install itself might take a day or two. But between the signed contract and the final payment sit a site survey, design, permitting, the install, inspection, and utility interconnection — and the money arrives in pieces along that path, often from a finance company rather than the homeowner.

That timeline is what solar books have to be built around. An installer can have a record month of installs and a terrible month of cash, and books that only record money in and money out will not say why.

Milestones, not invoices

Most residential solar revenue arrives in milestones. The exact points vary by contract and by finance partner, but the pattern is similar: something at signing or at install, more once the system is installed, and the final portion once the utility grants permission to operate.

The gap between install and that final milestone is usually outside your control — it depends on inspectors and the utility. So the books need to show, per project:

• the contract value
• which milestones have been billed and paid
• what is still owed, and what it is waiting on

That last column is the one that matters. A backlog of completed installs waiting on interconnection is real money, and it belongs in your cash flow forecast on realistic dates, not on the date the panels went up.

Finance partners and dealer fees

A large share of residential solar is sold with financing, and the finance company typically keeps a fee — often called a dealer fee — from what it pays you.

Record the full contract value as revenue and the dealer fee as a cost, not the smaller net payment as revenue. Recorded net, a financed job and a cash job at the same price look identical in the books, and you lose sight of how much financing is actually costing you. That number matters when you set prices, and it changes when finance partners change their terms. The same problem appears in HVAC — see rebates and consumer financing.

Equipment is most of the job cost

Panels, inverters, racking and batteries are expensive, often ordered per project, and sometimes held for weeks while a permit clears.

Job-specific equipment should be coded to the project it is for — as inventory or work in progress until installed, if you keep accrual-basis management books, so a month with lots of equipment purchases and few installs does not look like a loss.

Stock you hold for future jobs is inventory. Count it periodically; solar equipment is valuable enough that a gap between the books and the warehouse is worth finding quickly.

Sales commissions and cancellations

Solar is commonly sold by commissioned reps, and commissions can be one of the largest costs on a job. Three things keep them honest in the books:

• Code commissions to the project, so project margin includes the cost of selling it
• Record when they are earned and when they are paid — if reps are paid at signing but the job cancels before install, the plan’s clawback terms decide what happens next, and the books should show it
• Track cancellations — a signed contract that never installs still cost you the design, the survey and often the commission

A business with a high cancellation rate can look healthy on signed revenue and weak on installed revenue. The books should show both.

Incentives belong to someone

Tax credits, utility rebates and other incentives are part of most solar sales conversations. Which of them are the customer’s, which flow through you, and how any that pass through your hands should be recorded depends on the program and the contract. Keep them out of your own revenue unless your CPA confirms they belong there, and record anything you receive on the customer’s behalf as money owed to them until it is passed on.

Residential and commercial are different businesses

Commercial solar brings longer projects, progress billing, retainage, lien waivers, and often prevailing wage. Separate it from residential with classes or income accounts, and use a WIP schedule for the commercial jobs that span months.

Service and warranty

Monitoring, service calls and warranty repairs are a growing part of most installers’ work. Separate paid service from warranty work, and code warranty visits back to the original project where you can — it is the only way to see which equipment or which installers generate the returns.

Related

• Construction bookkeeping, step by step
• Deposits and progress billing
• Job costing for contractors

General information, not tax advice. Incentive programs, finance terms and their accounting treatment vary — confirm yours with your CPA.