Why Restoration Companies Run Short on Cash With Jobs Still Open, and How the Books Show It

Why restoration companies run short on cash

A restoration company starts work the day the water stops or the smoke clears. You pay for demo, drying equipment, crews and supplies right away. The insurance company does not pay right away. It asks for paperwork, photos and an adjuster visit first.

That gap is the whole problem. You spend today. You get paid weeks or months later. When you have two or three jobs open at the same time, the spending adds up fast. The cash in the bank does not keep up.

This is not a sign of a bad business. It is how restoration works. The job starts fast. The pay is slow. The books are what tell you whether the gap is manageable or about to put you under.

How work in progress shows up in your books

Work in progress is the money you have spent on a job that is not done and not billed yet. The crew hours. The equipment rentals. The materials. They are all costs you paid, but the job is still open.

When those costs sit in your books with no job tag, they look like overhead. Your profit and loss shows a big month of spending with no income to match. The number looks worse than it is, because the income is coming, just not yet.

The clean way is to tag each cost to the job it belongs to. Then the books show the job as open, with costs piled up and no income yet. When the job closes and the insurance pays, the income lands on the job and the profit shows up. You can read more about how we set this up on our bookkeeping service page.

The gap between spending and getting paid

The gap is the time between the day you start a job and the day the check clears. On a small job it might be a few weeks. On a big water loss or a fire rebuild, it can be months.

Every day in that gap, you are spending. Crew pay. Equipment rental. Dump fees. Fuel. The bills come in every week. The insurance check comes in when it comes in.

When you have one job open, you can usually ride it out. When you have several, the spending outpaces the cash. The books show it before the bank does, if they are kept right.

Here is what the gap looks like in a typical month.

How to track jobs that are still open

A job is open from the day you start until the day you bill the last invoice and get paid. While it is open, every cost needs a job tag. No tag, and the cost floats in overhead and the job looks cheaper than it is.

The clean way is one job tag per job. Each job gets its crew hours, its equipment rental and its materials. At month end, each job shows what it cost so far and what it has been paid so far. The difference is what the job is still owed, or what it is still spending.

Here is what to keep straight.

• **Tag every cost to the job: ** crew pay, equipment, materials and dump fees.
• - **Track what each job has been paid: ** insurance checks and deposits sit on the job, not in general income.
• - **Check the open job list each month: ** so no job sits with no costs and no one watching it.
• - **Watch the old jobs: ** a job open for months with no payment needs a call to the adjuster.

How progress billing helps your cash flow

Some restoration jobs let you bill as you go. That is called progress billing. Instead of one big invoice at the end, you send invoices at milestones. The first invoice after demo. The next after drying. The next after the rebuild starts.

Progress billing does not close the gap. It shortens it. You get some cash in while the job is still open, instead of waiting for one check at the end. The books show each invoice and each payment on the job, so the cash flow is easier to see.

Not every job allows progress billing. Some insurance companies want one invoice at the end. Some want it their way. The point is to bill as early as the job and the policy allow, and to track each one on the job.

How to see which jobs drain your cash

The open jobs are the ones eating your cash. Some of them will pay well when they close. Some will not. The books tell you which is which.

A job with high costs and no payment yet is holding your cash. A job that has been open for months with no movement is a warning sign. A job where the insurance paid half but the work is done and the rest never came needs a follow up.

Here is a simple check you can run every month.

• **List every open job and its costs so far: ** the total spent and the total billed.
• - **List what each job has been paid: ** the checks that came in and the ones still owed.
• - **Flag the jobs open longer than 60 days: ** those are the ones draining cash the longest.
• - **Flag the jobs with no payment at all: ** those need a call to the adjuster.
• - **Add up the cash tied up in open jobs: ** that number is what your cash flow is carrying.

When you see it this way, the jobs that are holding your cash stand out. You can call the adjuster, send the paperwork or close the job. You can not do that if the costs sit in one big overhead pile.

How insurance payments sit in your books

An insurance payment is not the same as a customer payment. A customer pays you for the work. An insurance company pays you for the job, sometimes after the customer pays their part first.

The payment might come in one check or several. It might come with a letter that explains what it covers. It might come with a deduction for your customer's share. The books need to show each one on the job it belongs to.

The messy way is to book the check to general income. Now the job looks paid, but you can not see which job it was for. When you look at the open job list, the job still shows as unpaid, even though the check came in weeks ago.

The clean way is to book each insurance check to the job. The job shows the income. The open list clears. Your cash flow report matches the bank.

A situation we clean up

The books that hid the cash drain

A restoration company runs several open jobs at the same time. Most are still in progress and one just closed. Every cost lands in one overhead account. Every insurance check lands in general income. At month end, the owner sees a big pile of spending and a big pile of income, but can not tell which job is which. The cash in the bank is low, and the owner can not see why.

Here is how we handle it. We pull the bank and the job records for the month. We tag each cost to the job it was for. We book each insurance check to the job it paid. We build a simple open job list that shows each job, what it cost, what it was paid, and what it is still owed. When we are done, the owner can see which jobs are holding the cash and which ones are about to pay. We set up a rule so the next job tags its costs from the start.

Mistakes we fix

• Job costs booked to overhead with no job tag
• Insurance checks booked to general income with no job
• Open jobs with no costs and no one watching them
• Jobs open for months with no follow up to the adjuster
• Progress invoices not tracked on the job
• No list of what each job is still owed

Common questions

Why does my restoration company run out of cash with jobs still open? Because you spend on the job before the insurance pays. The gap between spending and getting paid is where your cash goes. The books show it when each cost is tagged to the job.

How do I track work in progress? Tag every cost to the open job it belongs to. At month end, the job shows what it cost so far and what it has been paid so far. The difference is what the job is still owed or still spending.

Should I bill progress on a restoration job? If the job and the policy allow it, yes. Progress billing shortens the gap. You get cash in while the job is open instead of waiting for one check at the end. Track each invoice on the job.

How do insurance payments show in my books? Book each insurance check to the job it paid, not to general income. The job shows the income and the open list clears. Your cash flow report matches the bank.