Bookkeeping for Solar Installers: Deposits, Milestone Billing and Financing Partners

What solar installer books need to track

A solar install is not one invoice. It is a deposit, a few milestone payments, a financing partner that pays part of the bill, the panels, the racking, the inverters, the labor and the permit. Each one needs its own line so the profit per install is real.

When you track all of it by job, you can see which installs paid and which ones cost more than they brought in. When you do not, you get one big pile of panels, one big pile of labor, and no way to tell which roof was the good job.

Most solar shops run a few installs a month. A crew goes out, sets the panels, wires the inverter, passes the inspection, and bills the next milestone. Each install has its own costs. Each install has its own pay. When the books tie the two sides together, the shop makes sense. You can read more about how we keep these lines tied on our bookkeeping page.

Here is what a clean install looks like.

When each line ties to the job, the pay is real. When they sit in one pile, you are guessing.

How deposits and milestone billing show up in your books

Most solar jobs bill in steps. You collect a deposit when the job is sold. You bill a milestone when the panels go on the roof. You bill another when the system passes inspection. You bill the last piece when the system turns on.

The clean way is to book each step to the job it belongs to, on the day the payment is earned. A deposit is not income yet. It sits on the balance sheet until you do the work. When the panels go up, that milestone becomes income. When the inspection clears, that milestone becomes income. When the system turns on, the last piece becomes income. You can read more about how we handle these steps on our bookkeeping page.

The messy way is to book the whole contract price as income the day you get the deposit. Now your income looks too high in that month and too low in the months you did the work. The profit per install is wrong because the costs have not gone out yet.

Here is how to keep milestones clean.

• **Book the deposit to a deposit liability line: ** not to income yet.
• - **Move a step to income when it is earned: ** when the panels go up, when inspection clears, when the system turns on.
• - **Tie each milestone to the job: ** so the job total is real at month end.
• - **Track the unpaid steps: ** so you know what is still owed on each install.
• - **Match each payment to the bank: ** the cash that landed should tie to the step you booked.

When each step sits on its own line, your income matches the work you did. When it sits in one pile, you are guessing.

How financing partners and loan draws sit in your books

Many solar installs get paid by a financing partner. The partner pays part of the bill. Sometimes the partner pays the whole bill and the customer pays the partner back over time. The loan draw comes in on a set schedule, and it is a different kind of money than a customer check.

The clean way is to keep loan draws in their own line, away from cash milestones. A loan draw is money that came in to fund the job. It is not a sale on its own. The sale is the contract price. The loan draw is how part of that price got paid. When you book a draw, it clears the amount the customer still owes on that step.

The messy way is to book the loan draw as a second sale. Now your income looks double. Or the draw sits in a general income line and you can not tell which job it funded. You can read more about how we track draws in our loans and owner draws guide.

Here is how to keep financing clean.

• **Book the loan draw to a financing draw line: ** not to general income.
• - **Clear the amount owed on that step: ** the draw pays down what the customer still owed.
• - **Tie the draw to the job: ** so the job total shows how much came from the partner.
• - **Match the draw to the bank: ** the cash that landed should tie to the draw notice.
• - **Watch the funding fees: ** some partners take a fee out before the draw lands.

When the financing side sits on its own line, you can see how much of each job came from a partner and how much came from the customer. When it sits in one pile, the story is lost.

How equipment, panels and warehouse stock tie to the job

Panels are the biggest cost on most solar installs. Racking, inverters and wire run close behind. The way you track that stock changes what your books show.

The clean way is to hold panels and parts in a warehouse stock account until a crew pulls them for a job. When the panel goes on the truck, it stays in stock. When the panel goes on the roof, the cost lands on that job. At month end, you count the warehouse stock and the van stock and match the count to the books. When the two agree, the equipment side is clean.

The messy way is to expense every panel buy the day you buy it. Now every job looks free on panels, and the parts bill looks huge. No one can tell which job ate which panel. The next bid gets built on numbers that do not show what the last job cost.

Here is how to keep equipment clean.

• **Hold panels and parts in a warehouse stock account: ** until a crew pulls them for a job.
• - **Tie each panel to the job: ** the cost lands when the panel goes on the roof.
• - **Count the warehouse and van stock: ** each month, match the count to the books.
• - **Watch the slow movers: ** old panels that never get used tie up cash.
• - **Keep returns and damaged units apart: ** a returned panel goes back to stock, not to a new cost.

When the equipment side ties to the job, your profit per install is real. When it sits in one flat cost, the good installs and the bad installs look the same.

How to keep cash work apart from loan funded work

Some of your installs get paid in cash by the customer. Some get paid by a financing partner. The two should stay apart in your books.

When you mix them, the cash jobs look like they cost more than they did, because the loan funded costs drag them down. Or the loan funded jobs look like they paid more than they did, because the cash income props them up. You can not tell which kind of work to chase.

The clean way is to book cash milestones to cash income lines and loan draws to financing draw lines. Each kind gets its own income and its own cost. At month end, you can see the profit on cash installs and the profit on financed installs, side by side.

Here is the rule.

• **Cash milestones go to cash income lines: ** the deposit, the milestone and the final payment from the customer.
• - **Loan draws go to financing draw lines: ** the part the partner paid.
• - **Equipment and labor go to the job: ** the same way for both kinds of work.
• - **A job that starts as cash and turns into financed: ** gets split when the funding changes.

How the month end close works

At month end, every install needs its lines added up. The panels, the racking, the inverters, the labor, the permits, the milestones and the loan draws all pull together into one job total. The income for the job sits next to it. The difference is the profit for the job.

We start with the bank. We match each customer payment to the deposit that landed. We match each loan draw to the draw notice and the bank. We tie each panel and each part to the job it went on. We count the warehouse stock and the van stock and match the count to the books. Then we add up the job. We send you the profit and loss report and a balance sheet. The job totals sit inside the report.

Here is a simple month end check.

• **Match each milestone to the bank: ** every customer payment cleared.
• - **Match each loan draw to the bank: ** every partner payment cleared.
• - **Confirm each panel ties to a job: ** no orphan panels sitting in one cost line.
• - **Count the warehouse and van stock: ** match the count to the books.
• - **Add up the job total: ** the panels, racking, inverters and labor on the right install.

When the close runs every month, the shop stays clear. When it skips a month, the installs stack up and the next month is harder to close.

A situation we clean up

The loan draws that looked like a second sale

A solar shop runs six financed installs in a month. Every loan draw lands in the same income line as the customer deposits. The panel buys land in one big parts line. At month end, the books show income that looks double what the shop sold, and no one can tell which install the draws funded. The owner can not tell whether the cash installs or the financed installs paid better.

Here is how we handle it. We pull the loan draw notices for the month. We move each draw to a financing draw line and clear the amount the customer still owed on that step. We move the customer deposits and milestones to cash income lines. We tie each panel buy to the job it went on. When we are done, the owner can see the profit on cash installs and the profit on financed installs, side by side, and the bank matches the books. We set up a rule so the next draw lands on the financing line from the start.

Mistakes we fix

• Whole contract price booked as income the day the deposit came in
• Loan draws booked as a second sale instead of a payment on the contract
• Panels expensed at purchase with no warehouse stock account
• Customer deposits and loan draws mixed in one income line
• A milestone booked as income before the work was done
• No match between the loan draw notice and the bank
• Warehouse stock never counted so the panel total drifts
• Returns and damaged units booked as new costs instead of going back to stock

Common questions

Do I book the deposit as income? Not yet. Book the deposit to a deposit liability line until you do the work. Move it to income as you earn each milestone, when the panels go up, when inspection clears, and when the system turns on.

How do I track a loan draw? Book it to a financing draw line, away from cash income. The draw pays down what the customer still owed on that step. Tie the draw to the job and match it to the bank.

Do I need a warehouse stock account for panels? Yes. When you hold panels in stock until a crew pulls them for a job, your panel cost matches the work you did that month. When you expense panels at purchase, every job looks free on panels and the parts bill looks huge.

How do I see profit per install? Add up the income for the job, take out the panels, racking, inverters and labor, and what is left is what the install paid. Run the same check every month and the pattern shows up.