Construction CFO Services for HVAC Contractors

An HVAC company of any size is running three departments with different economics: installation (residential replacement, new construction, or commercial), service and repair, and maintenance agreements. We set each up as its own cost center with its own revenue, technician and installer labor, equipment and parts, vehicle cost, and a written overhead allocation. The monthly report shows three gross margins and three contributions to overhead instead of one blended number that is right for none of them.

The metrics differ by department, and we install the ones that matter. Install tracks equipment cost as a percent of sale, crew hours per job versus the sold hours, and days from sale to completion. Service tracks billable hours per technician per day, average ticket, first-visit completion rate, and callbacks. Maintenance agreements track active agreement count, renewal rate, visits owed versus visits completed, and the service revenue that agreement customers generate beyond the agreement itself. A blended margin tells the owner the company made money. Three margins tell the owner why.

If the company runs commercial or new-construction installs with contracts over a few months, that department carries a monthly WIP schedule with percent complete, earned revenue, and over and under billings, and it is reconciled to the ledger like any other construction job. Residential replacement installs, which usually finish in a day or two, are costed per job and closed the week they finish, so the install P&L does not carry a WIP schedule it does not need.

The 13-week cash forecast for an HVAC contractor is built around the calendar, not just around the receivables. Receipts are forecast by department and by week, using your own seasonal pattern from prior years and the current backlog of sold installs. Disbursements include distributor payments on their actual terms, weekly payroll at the current headcount, vehicle and equipment financing, marketing spend that ramps before the season, and any deposits owed on equipment ordered for future installs. The forecast is updated every Monday.

The purpose is to make the spring and fall decisions on purpose. Hiring installers in April, extending the line of credit before the fall dip, prepaying a distributor for a rebate, or funding a marketing push in February all get tested in the model before the check is written. The busy season should fund the slow one, but only if someone measured how much the slow one costs. Most HVAC owners know the low point is October. Fewer can say what the balance will be in the second week of it.

• Receipts by department and week using your own seasonal history
• Distributor payments modeled on actual terms and statement cycles
• Headcount and hiring decisions run through the forecast first
• Line of credit usage forecast 13 weeks out with a low-point date

Equipment is the largest cost on an install and the largest line on the distributor statement. We manage both sides. On the customer side, deposits collected on sold installs are tracked as customer deposits, not as revenue, and are matched to the equipment purchased for that job so a deposit is never spent twice. On the vendor side, distributor terms, early pay discounts, rebate programs, and year-end volume tiers are documented and built into the cash forecast. The distributor often extends more credit than your bank, and their terms have conditions worth reading.

Truck stock and warehouse inventory are the parts of an HVAC balance sheet that quietly grow. We set a physical count cadence, a reorder method, and a write-off policy, and we report inventory turns by department. Parts that go on a truck and never appear on an invoice are a cost of service that belongs on the service P&L, not in a warehouse account that grows until the CPA asks about it.

A customer deposit is money you are holding for a job you have not done. It belongs on the balance sheet until the equipment is set, and the cash forecast should show the day it stops being yours to hold.

Maintenance agreements are sold once and delivered over a year, usually as two visits. The cash arrives up front. The cost arrives in the shoulder months when the visits happen. We record agreement sales as deferred revenue and recognize them as visits are completed, so the agreement department shows its real margin in each month rather than a windfall in spring and a loss in fall. The report also shows visits owed, which is a liability the company has promised to deliver with technicians it must keep on payroll.

The value of the agreement base is in what it generates: renewal rate, the repair and replacement revenue that comes from agreement customers, and the density it gives the dispatch board in slow months. We track those numbers by month so the decision to price agreements, staff for their visits, or push renewals in a given quarter is a numbers decision. Agreement revenue is the closest thing HVAC has to recurring revenue, and it deserves a balance sheet that treats it that way.

Labor is the cost you control most and measure least. We compute a fully loaded burden rate by department, since installers, service technicians, and maintenance technicians carry different wage rates, overtime patterns, vehicle costs, and training time. Payroll posts to jobs and departments weekly at the loaded rate, so the install job cost report and the service P&L both show what the labor actually cost, and the sold-hours versus actual-hours comparison on installs is a Friday number.

Utilization is reported per technician per week: billable hours, drive time, callbacks, and unapplied time. Low utilization in the service department is usually a dispatch problem, not a technician problem, and the report makes that visible. On the install side, crews that run 20 percent over sold hours on a repeated basis point to an estimating or a sales problem. Either way, the number belongs on the weekly report with a name next to it, and the conversation belongs to the department manager.

Many HVAC contractors grow into commercial and new-construction work and discover the accounting is different. Contracts run for months, billing is by pay application against a schedule of values, retainage is held, and the general contractor pays when the owner pays. We run that department with a monthly WIP schedule, an estimate to complete from the PM, committed cost from equipment purchase orders and any subcontracted controls or sheet metal, and a change order log. Over and under billings post to the balance sheet each month.

If the work requires bonding, the surety will read the WIP, working capital, and the backlog gross profit schedule. We prepare that package quarterly and send it to your agent before renewal. Bank reporting follows the same numbers: covenant calculation monthly, borrowing base from the same aged receivable that feeds the forecast. In 90 days the goal is three department P&Ls you trust, a seasonal cash forecast you use to hire and to borrow, deferred revenue on the balance sheet, and a WIP schedule for the commercial side that ties to the ledger.