Bill from Illinois asks: “Is covering warranty a cost associated with an individual project, or is it overhead?”
NSCA responds: We suggest carrying this cost as overhead, which allows you to close out the project sooner. When you close the job out as soon as possible, you can carry the time billed toward warranty as a line item on your profit and loss statement.
Attempting to decide on a percentage of time spent on warranty for a job is risky. The work can be very unpredictable for a variety of reasons – one being extended product warranties. Because several manufacturers have longer warranty periods (two-year, five-year, lifetime, etc.), the end-users assume that products installed by your integration firm are covered under the warranty from your organization.
For tips on how to be clear with customers regarding what your warranty covers, and for how long, watch this short video.