In my role as a coach, I speak with owners of restoration businesses every day. My observation: The most successful have a tight process around their invoicing, payables and collections activities. They don’t “hope” for strong cash flow. They have a system which ensures it!

Here are three areas to consider if you’d like to improve your financial situation. For even more help with making it happen, I encourage you to look at my blog post: Planning for a Strong 2nd Half of 2020.

  1. Billing Rapidly.  I’ll use a simple water damage mitigation job as an example. The same principles apply to even the most challenging reconstruction projects.
    1. Day 1: Respond to the loss and begin mitigation. On the initial response, the job should be fully scoped, sketched and all photos taken. All documentation should then be supplied to the office. Depending on your production management platform, this could be done in real time. (If you aren’t already using industry-specific tech, consider DASHiRestore and Matterport.)
    2. Day 2: Xactimate estimate is ready for review by the production manager and/or owner. Since the job is still underway, you have the opportunity to correct things you see in the photos and don’t like (e.g., too little equipment, sloppy demo, additional demo needed, etc.).
    3. Day 3: Make final adjustments to the estimate.
    4. Day 4: Job is completed and billing package gets sent/uploaded to the insurance company or third-party administrator.
  2. A documented collection process.  A consistent system for collecting money can make a huge difference. Here are just a few ideas to get you started. They are just ideas. You’ll want to customize this for your business.
    1. Assign the responsibility to one primary person.
    2. Have a weekly meeting, at minimum, to review the AR report and notes in your production management system.
    3. Understand where the money is coming from. Are you being paid by the homeowner directly? Will the carrier be paying, or is the check going to the insured? Is a mortgage company involved?
    4. Make contact within the first 48 hours of billing to make sure everything needed has been received, and ask when you can expect payment.
    5. Follow up again in seven days for an update.
    6. If revisions are requested, make them on the same day and resubmit the estimate.
  3. Payables will also affect your cash flow and your relationship with vendors.  An internal process for check requests is critical. Before signing a check to a vendor, here are several thoughts to consider:
    1. Be sure the work you are about to pay for has been billed to your client. Example: You’re given an invoice for an on-site dumpster. Was it scoped and invoiced to the client? If you don’t catch it now, you’re likely to pay the bill and never know if you will be paid for that service.
    2. Look at a job profit and loss statement whenever you are about to sign a check. This will give you a clear picture on the status of invoicing, collections, inside labor cost and subcontractor costs. There’s no better way to understand what went on with a job, from a cash standpoint.
    3. Do you have a current certificate of insurance for the subcontractor you are about to pay? This is important when it comes time for your annual worker’s compensation audit. If you don’t have a current COI, you may be responsible for the worker’s comp premium.

Don’t just “hope” for a strong cash flow. Guarantee it! By implementing this simple system, you’ll not only create a measurably stronger cash position. You’ll sleep better at night!

And naturally, if this or any other aspect of your business has you tossing and turning, please reach out. I can help!

 

Scott Miller has been in the restoration industry since 2005 and focuses on helping owners grow revenue, improve profitability, manage cash-flow and develop a culture of accountability with their teams. He is a certified coach with Best Year Yet and The Center for Executive Coaching.

Scott Miller  Book Time With Me Here

O | 610-263-2772

C | 610-659-5990

https://thegrowthleague.com

scott@thegrowthleague.com