C&R’s State of the Industry Report revealed maintaining cash flow as one of the biggest challenges restorers faced in 2022. The question we asked experts to answer is, “what systems have you implemented to ensure consistent cash flow in your business?” Here’s what they had to say:
Outsourcing Your Insurance Billing
One of the most effective ways to ensure cash flow for your business is outsourcing your accounts receivable process to an insurance billing specialist. Negotiating with insurance adjusters is their specialty and they will ensure you get the optimal payment amount for the jobs you perform. Furthermore, having your billing process covered allows you to focus on other aspects of your business including:
- Hiring, training, and retaining a strong team of technicians
- Investing in your business to achieve growth and increased profitability
- Expanding to provide additional services (e.g., reconstruction, biohazard, etc.)
We’ve seen time and time again the relief that restoration contractors have when they don’t have to deal directly with adjusters. Having the freedom to focus on business growth and getting a profitable return on their claims is what ultimately maintains consistent cash flow to their business.
- Josh Ehmke, Co-Founder and Owner of One Claim Solution
Set Up Draw Payments Before Starting Work
Pine Ridge Restoration’s approach is a little more stringent than some others in the industry. Due to the fact that the “settlement and negotiation” time frame has been elongated longer than normal (“delay”), we are taking that time to onboard and educate our clientele on the processes that they may or may not experience during this process (“defend”). The client is our best advocate because it is their contract with the carrier to ensure that they are accurately and properly indemnified for their insurance loss. Our scopes of mitigation and repairs are submitted with exceptional accuracy, support, and detail to try to push the carrier along. At the end of the day our firm can only represent our bodies of work, and not negotiate the policy language. Therefore, our approach is simple from a cash flow perspective – we are not the bank, not the church, so it is not our policy to bankroll the project on the if-come the carrier makes the client whole. We ask for a substantial down payment up front for mitigation services (NOT deductibles, that’s their policy language, and not in our agreements or conversations with the client) – and then balance due in full prior to engaging in repairs. The mitigation scope/invoice is not a negotiable document, it’s for services rendered in the rears and supported by IICRC S500 5th Edition language.
The repairs are negotiable however, and subject to review and conversation prior to beginning work. At the end of the day, we are working for the client and not the carrier. Often the tactics from certain carriers can drag out the timeline forcing the contractor to yield because the client “just wants their property fixed”. We do not yield to this, we stay out of that. We always ask for draw payments BEFORE work is initiated. On the low end, 30% of our agreed scope between the client and Pine Ridge. On the high end, 50% due prior to beginning. This covers our administrative labor, technician labor, overhead, costs of obtaining building materials, etc. so we aren’t bank rolling the project ourselves.”
- Rick McGuigan, President of Pine Ridge Restoration
Diversify Services, Develop a Reserve Fund, and Set Up an Operating Systems
Without a doubt the number one challenge I hear restoration owners face, and the biggest challenge I dealt with when I owned a restoration company was maintaining cash flow. So many things feel outside a restorers control when it comes to cash flow, but there a few things I see owners doing that consistently work and bring peace of mind.
The first is to diversify services so their entire business is not built on emergency services. This includes adding services like powerwashing, plumbing and rug cleaning. The other thing I recommend owners do is to develop a reserve fund. If you don’t have one, start today and always set aside a percentage of every job into a separate rainy day account. And finally, set up your operating systems to plan for how & when you’ll be paid BEFORE you start any job. Having and following the right systems will remove the pain of wondering when you’re going to get paid.
- Derek Preece, Owner Spot On Solutions
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