True Labor Burden Analysis: Technician vs. PM vs. Estimator

What You’re Really Paying for Each Role—and Why It Matters

Most restoration companies know their hourly wage rates—but very few know their true cost per employee. And when you're managing multiple roles like technicians, project managers, and estimators, failing to track actual labor burden can lead to underbidding jobs, overhiring, or mispricing services.

Let’s break down what labor burden really includes, how it varies by role, and how to use this analysis to tighten margins and grow profitably.

What Is Labor Burden?

Labor burden is the total cost of employing someone—beyond just their wage.

It includes:

• Payroll taxes (FICA, FUTA, SUTA)

• Workers’ compensation

• Health, dental, and other benefits

• PTO, holidays, sick days

• Training time

• Downtime (for techs waiting between jobs)

• Company-provided tools, uniforms, or vehicle allowances

• Admin or HR support (indirect labor burden)

If you’re paying a tech $28/hour, your actual hourly cost could easily be $38–$42 once all burden is factored in.

Labor Burden by Role: A Breakdown

Technicians (Field Labor)

Wage Range: $22–$30/hr
Typical Burden %: 35%–45%
Drivers of Cost:

• High workers’ comp rates (due to physical risk)

• Frequent use of overtime, especially on emergency jobs

• Paid idle time (drive time, waiting for approvals, equipment setup)

• Uniforms, PPE, tools, or vehicle costs

Why it matters:
Technicians are revenue-producing—but only when they’re billable. You must account for unbillable time in your labor burden and make sure your pricing covers it.

Project Managers (PMs)

Salary Range: $65k–$100k+
Typical Burden %: 25%–35%
Drivers of Cost:

• Salaried positions often include higher benefits packages

• Less risk = lower workers’ comp

• Overhead position (non-billable)

• Usually includes phone, vehicle, fuel reimbursement

Why it matters:
PMs don’t show up on job costing reports unless you allocate their time correctly. If your gross margin looks healthy but your net margin is shrinking, PM burden may be the leak.

Estimators

Salary or Commission-Based
Typical Burden %: 20%–30%
Drivers of Cost:

• Often hybrid comp (base + commission)

• Light equipment/tools cost

• Overhead position unless time is job-allocated

• Potential sales expenses (mileage, lunches, networking)

Why it matters:
Estimators contribute to revenue indirectly. If their close rate is low or job sizes are shrinking, their cost per dollar sold goes up—quickly. Tracking their burden helps evaluate ROI on the role.

How to Use Labor Burden Data in Your Business

1. Set Your Pricing With Confidence
If you don’t know your true labor burden, you can’t price jobs for margin. Use burdened labor rates when building estimates—not just base wages.

2. Evaluate Role Efficiency
Compare total cost vs. productivity:

• How much revenue does each tech produce per month?

• What’s the average gross margin on jobs managed per PM?

• What’s the revenue per estimate written?

3. Forecast Hiring Accurately
Use burdened costs when projecting how new hires will impact cash flow and profit—not just their base salary.

4. Benchmark and Improve Over Time
Track burden % quarterly. If it’s creeping up, dig into what’s changed—benefits, overtime, inefficiencies? Early detection helps you course-correct before it impacts profitability.

Pro Tip: Don’t Treat All Techs the Same

A senior mitigation tech might be producing $35k/month in revenue, while a newer tech is producing $18k—but both are burdened similarly. Segment your analysis by tech level to make better hiring, training, and compensation decisions.

Ready to see what your team really costs—and how to protect your margins as you grow? At Kiwi Cash Flow, we help restoration companies build accurate, role-specific labor burden models and use them to improve pricing, hiring, and profitability.
Book a free strategy call today and let’s break down the numbers together.

Scaling Your Labor Force Without Ballooning Overhead

In the restoration industry, labor drives revenue—but it can also quietly crush your margins if you’re not strategic. As you scale beyond $5M, labor management gets more complex: you’re adding techs, PMs, estimators, admin, and field managers. The risk? Overbuilding your team faster than your revenue grows.

Here’s how to scale your labor force intentionally—so you can take on more jobs without ballooning overhead or putting cash flow at risk.

First, Understand the Difference: Billable vs. Non-Billable

To grow profitably, your ratio of billable to non-billable labor must stay healthy.

• Billable labor = techs in the field generating revenue

• Non-billable labor = office staff, project managers, admin, etc.

As companies scale, they often overhire on the non-billable side—especially when systems aren’t tight and leadership is overwhelmed. The result? Labor costs go up, but profit doesn’t follow.

Tip: Set a target labor efficiency ratio (LER). For example, total billable labor should be at least 65–70% of total labor costs.

Build for Capacity—Not Convenience

Hiring because you’re stressed today creates bloated payroll tomorrow.

Instead:

• Track actual job volume per tech or PM—then hire when a crew or manager hits 90–95% of capacity.

• Use job costing to analyze how much revenue each field tech is generating.

• Automate before hiring: Can a system or process replace what you thought needed a full-time hire?

Use Tiered Labor Models

You don’t always need a $30/hour tech for every task. Consider building out:

• Helper roles for moving equipment, demo, cleaning

• Tech Level 1 / Level 2 / Level 3 structure with clear wage-to-skill alignment

• Floating labor pool that can shift between divisions or job types depending on volume

This lets you deploy labor more cost-effectively—matching skill level to job type while preserving margins.

Subcontract Strategically—But Track Closely

Subs can help you scale fast without payroll risk—but only if you’re tracking margin correctly.

• Don’t assume subs are always cheaper.

• Require clear scopes of work and firm quotes before assigning jobs.

• Use job costing reports to compare gross margin on subbed vs. in-house jobs.

If subs are cutting into margin—or delivering inconsistent quality—it’s time to reevaluate.

Monitor Labor Burden (and Its Trend Over Time)

As you add employees, don’t forget to track total labor burden:

• Payroll taxes

• Workers' comp

• PTO

• Benefits

• Downtime

• Training costs

Labor burden can add 25–40% on top of hourly wages—and it grows as your team does. If your burden % is creeping up each quarter, that’s a red flag for long-term overhead creep.

Solution: Use a labor burden calculator and refresh it quarterly to ensure your pricing and capacity planning are still accurate.

Know the Hiring Triggers in Your Forecast

You shouldn't be guessing when it’s time to hire. Tie labor planning directly into your financial forecast:

• How much additional revenue must be booked to support a new tech?

• Can current cash flow support the onboarding and ramp-up period?

• Are you hiring ahead of demand or chasing it?

Forecasts aren’t just about revenue—they should tell you when you can afford to grow your team.

Growing your labor force should increase your profit—not just your payroll. When you track the right numbers and scale intentionally, you build a stronger, leaner company that can take on more work without risking cash flow or profitability.

Want help analyzing your labor costs, ratios, and readiness to hire? At Kiwi Cash Flow, we help restoration companies build financial systems that support smart, profitable growth. Book a strategy call today and let’s take a look at your team structure before you make your next hire.

Budgeting Season: How to Build a Board-Level Forecast

When budgeting season hits, most companies scramble to update last year’s spreadsheet, plug in growth targets, and hope it all adds up. But if you’re leading a restoration company pushing $10M+ in revenue—or reporting to investors, banks, or a board—you need a different level of precision.

A board-level forecast isn’t just about hitting “submit” on a budget. It’s about building a financial plan that aligns with strategy, anticipates risk, and gives decision-makers confidence in your next 12–18 months.

Here’s how to build one that actually drives business decisions—and holds up under scrutiny.

Step 1: Start With Strategy, Not Spreadsheets

Before diving into numbers, ask the big questions:

• Are we expanding into new markets or services?

• Are we adding crews, project managers, or estimators?

• What risks could hit revenue (TPA loss, delays in collections, labor shortages)?

• What capital expenditures are on the table?

Your forecast should reflect these plans and pressures—not just a straight-line growth assumption.

Step 2: Break It Down by Division or Service Line

High-performing restoration companies don’t forecast in bulk. They build segmented models:

• Mitigation

• Rebuild

• Contents

• Environmental or specialty services

• Regional or branch offices

Each unit should have its own revenue and cost structure. Forecasting this way helps you set realistic performance expectations and gives your board better insight into where profits are coming from.

Step 3: Build a Driver-Based Revenue Model

A board-level forecast connects the dots between operational activities and revenue. That means starting with things like:

• of jobs per month by service line

• Average job size

• Close rate from estimates

• Capacity based on staffing

From there, you can layer in seasonality, marketing campaigns, or territory growth to project realistic monthly income.

Step 4: Get Granular With Expenses

Avoid the trap of budgeting expenses as flat monthly averages. Instead, budget based on:

• Labor by role (and include labor burden)

• Subcontractor and materials cost per job

• Recurring fixed costs (rent, software, insurance)

• Variable costs tied to volume (fuel, temporary labor, equipment rental)

This gives you more accurate gross margins and better insight into what’s driving profit fluctuations.

Step 5: Incorporate a Rolling Cash Flow Model

Boards and investors care about cash just as much as profitability—especially in restoration, where delays in insurance payments can create serious gaps.

Overlay a 13-week rolling cash forecast that:

• Reflects timing of collections by service line

• Includes payroll, rent, and major vendor payments

• Accounts for CapEx or debt service

You’ll stand out from the crowd if you can speak to both profitability and liquidity.

Step 6: Stress-Test Your Forecast

Show you’re thinking like a CFO, not just a department head. Run a few scenarios:

• 20% slowdown in TPA referrals

• Delay in major rebuild payments

• Surge in labor costs or overtime due to weather events

Boards love to see that you’ve thought through what could go wrong—and that you have a plan.

Step 7: Use It to Guide Monthly Leadership Meetings

A board-level forecast shouldn’t sit in a folder until next year. It should:

• Drive monthly reporting

• Be compared against actuals

• Inform hiring and capital decisions

• Tie into incentive plans and bonuses

Your forecast becomes a living strategy tool—not just an annual budgeting task.

Need help building a forecast that’s board-ready and field-tested for restoration companies? At Kiwi Cash Flow, we help contractors turn financial reports into decision-making tools. Book a strategy call now and let’s build a budget that backs your next level of growth.

Identifying Hidden Profit Leaks in 8-Figure Restoration Businesses

When your restoration company crosses the $10 million mark, it’s easy to assume that the heavy lifting is done. You’ve built strong teams, systems, and market share. But the truth is—the bigger you get, the easier it is for profits to quietly leak out.

At this level, it’s not about whether you’re profitable. It’s about whether you’re leaving hundreds of thousands of dollars on the table because of inefficiencies hidden in the details.

Here’s how to find the hidden profit leaks that are common in 8-figure restoration companies—and what you can do about them.

1. Poor Job Costing Discipline

You probably have a job costing system in place—but is it being used consistently and accurately across all divisions?

Common leak points:

• Labor not tracked correctly to jobs

• Materials expensed to general ledger accounts instead of assigned to projects

• Missing overhead allocation (especially project manager time, equipment usage)

Solution:
Audit 5-10 random jobs per division. Are the actual gross margins where you expect them to be? If not, dig into why—and enforce tighter data discipline.

2. Unbilled or Underbilled Work

With large volume comes chaos. When multiple crews are in the field, it’s easy to forget to bill for:

• Equipment left onsite longer than estimated

• Change orders not signed but completed

• Emergency labor hours that weren’t included in the original scope

Solution:
Run a monthly audit of jobs vs. invoices to catch discrepancies. Build automated alerts for unapproved or missing change orders.

3. Inefficient Labor Deployment

When you scale quickly, labor costs tend to creep. Crews might be clocked in but idle. Project managers might be overburdened and unable to properly supervise field teams. Overtime may be used to compensate for poor scheduling.

Solution:
Compare labor cost as a % of revenue across crews or locations. Spot outliers. If one team consistently operates at lower margins, it’s a signal to investigate deeper.

4. Vendor Bloat & Overpaying for Materials

At $10M+, you should be getting better deals. But unless someone’s actively managing vendor relationships, pricing often stays the same as it was at $3M. You might also be buying from too many vendors, missing out on volume discounts.

Solution:
Consolidate vendors where possible. Have someone price-check your top 20 materials quarterly. Negotiate based on spend.

5. Underperforming Divisions Hiding in Consolidated Reports

Your company may be profitable overall—but if you’re not reviewing financials by division, you may be carrying a chronically underperforming branch, team, or service line.

Solution:
Implement division-level P&Ls with clear KPIs. Hold leaders accountable to gross margin targets. Use internal benchmarking between divisions.

6. Cash Flow Timing Issues Masking Profitability Problems

When collections are delayed—especially with insurance carriers—you might not feel a profit leak until you’re in a cash crunch. That’s often when leadership realizes a job was never profitable in the first place.

Solution:
Pair job costing reports with a rolling cash flow forecast. Identify when revenue should hit vs. when it actually does—and how long you’re carrying costs in the meantime.

Turn Leaks Into Leverage

The scariest thing about hidden profit leaks is how quietly they add up. But the good news? Once you find them, fixing them puts money straight to the bottom line—without needing to grow top-line revenue.

You’ve already built the machine. Now it’s time to tighten it up and let it run at max efficiency.

Want a fresh set of eyes on your numbers? Kiwi Cash Flow helps 8-figure restoration companies tighten margins, uncover profit leaks, and turn reports into strategy. Book a free strategy call today and let’s plug those holes.

Rolling Cash Flow Forecasting Across Multi-Division Operations: How to Stay Ahead of the Curve

As a restoration company grows into multiple service lines or geographic divisions, managing cash flow gets exponentially more complex. It’s no longer just a matter of “Are we making money?”—it becomes, “Where is the money coming from? When will it arrive? And who is burning through it?”

That’s where rolling cash flow forecasting becomes your most powerful financial tool.

What Is a Rolling Cash Flow Forecast?

A rolling cash flow forecast projects your cash inflows and outflows forward over a set period—typically 13 weeks—and updates each week. Instead of static, end-of-month reports, you’re making real-time, forward-looking decisions.

For companies with multiple divisions (mitigation, rebuild, contents—or multiple branches), a division-level rolling forecast helps you see:

• Which teams are funding operations—and which are draining cash.

• Timing mismatches between revenue and expenses.

• Upcoming shortfalls before they hit your bank account.

Why It Matters for Multi-Division Restoration Companies

1. Uneven Payment Cycles Across Divisions
Rebuild jobs may take 90+ days to collect, while mitigation or contents can turn cash much faster. Without forecasting by division, it’s easy to miss how one part of the business is floating another—and for how long.

2. Misalignment of Resource Allocation
If one division is highly profitable but capital-constrained, while another is over-resourced but cash-poor, leadership needs visibility to rebalance quickly.

3. Planning for Big Expenses
Equipment upgrades, hiring pushes, or marketing campaigns can all impact cash—but knowing which division can support those investments is critical to avoid overextending.

How to Build a Rolling Forecast Across Divisions

Step 1: Separate Forecasts by Division or Department
Create individual forecasts for each branch, service line, or region. Include:

• Expected receivables (based on AR aging + pipeline)

• Weekly recurring expenses (payroll, rent, software)

• One-time or upcoming costs (equipment, insurance premiums, etc.)

Step 2: Consolidate for a Company-Wide View
Roll up each division’s forecast into a master cash flow dashboard. This gives you a bird’s-eye view of where the company stands each week—and which areas need attention.

Step 3: Update Weekly, Not Monthly
Forecasting loses its value if it’s not real-time. Review your rolling forecast every week to adjust for actual collections, new jobs won, and shifting timelines.

Step 4: Use It to Drive Decisions
Don’t just report the forecast—act on it. Use the data to:

• Delay non-essential spending

• Accelerate collections

• Move resources between divisions

• Communicate cash positions to stakeholders and leadership

Pro Tip: Turn Your Forecast Into a Strategic Weapon

A rolling forecast isn’t just a finance tool—it’s an operational advantage. When your leadership team knows what’s coming 13 weeks ahead, you can:

• Take on larger jobs with confidence.

• Time hiring to match real cash availability.

• Avoid emergency lines of credit or late payroll.

And when paired with job costing and KPI tracking by division, it becomes the foundation of true financial control.

Need help building a rolling forecast that actually works across your divisions? We build simple, powerful cash flow tools designed for growing restoration companies. Schedule a call with Kiwi Cash Flow and let’s make your cash work harder—division by division.

Margin Optimization by Service Line: Mitigation vs. Rebuild vs. Contents

As your restoration company grows, knowing your top-line revenue is no longer enough. To scale profitably, you need to go deeper—line by line—into what’s actually driving margin. Because not all revenue is created equal, and your profitability can vary drastically between mitigation, rebuild, and contents.

Let’s break down how to analyze and optimize your margins by service line so you can make smarter decisions and build a more profitable business.

Mitigation: High-Speed, High-Volume, Lower Margin

The Good:
Mitigation tends to be fast-moving, consistent work. It’s often the foot in the door for new clients and TPAs. Cash flow can be stronger here because payment cycles are usually faster compared to rebuilds.

The Challenge:
Margins can be tight due to heavy labor costs, 24/7 dispatch, and constant equipment turnover. If you’re not careful, overtime labor and unbilled equipment days can quietly erode your profit.

Ways to Optimize:

• Use job costing to track equipment utilization and rental ROI.

• Monitor labor efficiency and after-hours premiums.

• Implement checklists for complete documentation and accurate billing (especially for TPAs).

• Set minimum job thresholds for dispatching crews after hours.

Rebuild: Big Revenue, Big Risk, Big Reward

The Good:
Rebuild jobs offer large revenue potential and high per-job profitability—if managed well. You’re controlling the whole project, which can strengthen client relationships and improve overall job margins.

The Challenge:
Payment delays, change orders, subcontractor overruns, and missed estimate details can all eat into margin. Long project timelines and material price volatility add additional financial exposure.

Ways to Optimize:

• Break down your rebuild jobs into phases for better cash flow tracking.

• Closely track subcontractor costs vs. estimates.

• Require pre-approvals for change orders and make sure they’re billed.

• Use standardized estimating templates to avoid missed line items.

Contents: High Margin, High Complexity

The Good:
Contents cleaning and pack-out services can be extremely profitable. Labor is often lower-skilled and lower-wage, and once you’ve built the infrastructure (storage, cleaning equipment), the variable costs are relatively low.

The Challenge:
Operational complexity is high—tracking chain of custody, managing storage space, and documenting every item properly. Mistakes or losses in contents work can be costly and damage reputation.

Ways to Optimize:

• Track revenue per cubic foot of storage or per contents tech hour.

• Use software to automate inventory management and reduce human error.

• Charge appropriately for storage and retrieval—not just cleaning.

• Evaluate which clients (or adjusters) are referring profitable vs. high-risk contents jobs.

Why Service Line Margin Analysis Matters

When you understand margin by service line, you can:

• Double down on your most profitable work.

• Make data-informed decisions about hiring, marketing, and equipment investments.

• Price more accurately based on real costs—not gut feel.

• Spot underperforming divisions before they drag down your overall profits.

Too many 8-figure restoration companies hit a ceiling because their revenue grows faster than their profits. Margin optimization is how you break through that ceiling.

Not sure where your margins are strongest—or where you're bleeding cash? We help restoration companies get the clarity they need to make smarter financial decisions. Book a free strategy call with Kiwi Cash Flow to find out how your service lines stack up.

What You Need to Know About Finances When Starting a Restoration Company

Starting a restoration company is exciting—you’re jumping into a field that provides essential services, helps people in times of crisis, and can be incredibly profitable. But before the trucks are wrapped and the dehumidifiers are humming, it’s critical to lay a solid financial foundation. Here’s what you need to know about finances when launching your restoration business:

1. Start With a Budget (And Don’t Skip the Forecast)

Many business owners think a budget is something you build after you’re already bringing in revenue. But in restoration, your startup costs can be significant—equipment, vehicles, software, marketing, certifications, and insurance all add up quickly. A detailed budget helps you:

• Plan how much capital you need to get started.

• Avoid running out of cash during slow months.

• Know when you can afford to hire your first tech—or your third.

Also, a basic 12-month forecast helps you anticipate revenue fluctuations and expenses, which are common in restoration due to seasonal surges and delays in insurance payouts.

2. Know Your Labor Burden

It’s easy to assume your technician costs $28 an hour because that’s their wage—but that’s just the beginning. Add payroll taxes, workers’ comp, paid time off, health benefits, and time spent not on billable jobs, and your actual hourly labor cost can be closer to $38–$42/hour. Underestimating this number can make jobs that look profitable quietly eat away at your cash.

Use a labor burden calculator to get a more accurate picture before setting pricing or quoting jobs.

3. Job Costing Is a Must

Restoration jobs can vary wildly in scope, and not tracking job-level profitability is one of the biggest mistakes new business owners make. Job costing means assigning all income and all relevant expenses (labor, materials, subs, equipment usage, etc.) to a specific project.

Done right, job costing will tell you:

• Which types of jobs are most profitable.

• Whether certain technicians or teams perform better.

• Where to tighten up estimates or improve efficiency.

4. Don’t Rely Solely on the Bank Balance

It’s tempting to check your bank account to see if you’re “doing okay,” but restoration accounting requires more nuance. Insurance claims can create long payment delays, and the lag between doing the work and getting paid can mislead you. A healthy bank balance might just mean you haven’t paid vendors yet—not that you’re turning a profit.

Instead, review actual financial reports (Profit & Loss, Balance Sheet, Cash Flow) every month. If they confuse you, don’t worry—you’re not alone. A good outsourced CFO or bookkeeper can help explain them.

5. Cash Flow Is King

Restoration companies are often profitable on paper but cash-poor in reality. Why? You’re paying labor, materials, and overhead now, but you may not get paid for 30, 60, or even 90 days.

To protect your cash flow:

• Set up clear payment terms with insurance companies and clients.

• Consider factoring or financing for large jobs.

• Build a cash reserve or line of credit before you need it.

6. Get Help Early

If you're serious about growing your restoration company, don't try to be your own bookkeeper, CFO, and estimator. You're juggling enough already. Hiring a financial pro—someone who knows restoration—can save you time, money, and stress.

At Kiwi Cash Flow, we specialize in helping restoration contractors understand their numbers and build companies that are both profitable and sustainable. From job costing setup to monthly KPI reports and forecasting, we’ve got your back.

Starting a restoration company? Don’t go it alone. Schedule a call with us today and build your business on a strong financial foundation.

Beyond Profit: Understanding the Three Bottom Lines in Your Restoration Business

Most business owners focus on a single bottom line—net profit. But as any experienced restoration business owner knows, profit on paper doesn’t always translate to financial stability or long-term success.

That’s why in Managing by the Numbers, by Kremer and Rizzuto, the concept of the three bottom lines is introduced as a more complete way to measure business health:

1. Net Profit – Are we making money on paper?

2. Operating Cash Flow – Do we actually have the cash to run the business?

3. Return on Assets (ROA) – Are we using our equipment and resources efficiently?

Understanding and tracking all three bottom lines will help you avoid cash flow crises, make smarter financial decisions, and build a business that thrives long-term.

Bottom Line #1: Net Profit – Are We Making Money on Paper?

Net profit is the most familiar financial metric. It’s the number you see on your income statement (P&L), calculated as:

Net Profit=Revenue−Expenses

If this number is positive, your business is technically profitable. However, in restoration, net profit can be misleading because of delays in insurance payments, seasonality, and high overhead costs.

What to Watch:

• Gross Profit Margin – Are you pricing jobs correctly to cover labor, materials, and overhead?

• Net Profit Margin – After all expenses, how much of every dollar earned is actual profit?

• Job Costing Accuracy – Do you really know which jobs are profitable and which are draining resources?

The key takeaway: Net profit is essential, but it doesn’t mean much if you don’t have cash in the bank when bills are due. That’s where Operating Cash Flow comes in.

Bottom Line #2: Operating Cash Flow – Do We Have the Cash to Run the Business?

Restoration businesses often find themselves in a cash crunch—payroll, materials, and equipment costs are due long before insurance payments arrive. That’s why Operating Cash Flow (OCF) is just as important as net profit.

OCF measures the actual cash moving in and out of your business from operations—not from loans or equipment sales.

OCF=Net Income+Non-Cash Expenses−Changes in Working Capital

Why Cash Flow is Critical in Restoration

• You have to pay for jobs before you get paid – Employees, vendors, and equipment maintenance don’t wait for insurance checks.

• A positive net profit doesn’t mean you have cash available – If receivables are slow, you could be “profitable” while struggling to make payroll.

• Growth requires cash – Expanding your business (hiring, buying new equipment, taking on more jobs) is impossible if your cash flow is negative.

How to Improve Operating Cash Flow:

• Invoice immediately and follow up on outstanding payments.

• Require deposits or progress payments on large jobs.

• Negotiate better payment terms with vendors to keep cash longer.

• Use Kiwi Cash Flow, a CFO subscription service that helps restoration businesses track financial insights, budget forecasting, and KPIs.

The key takeaway: Even a profitable business will fail without positive cash flow. But profitability and cash flow alone aren’t enough—you also need to know how well you’re using your business’s assets.

Bottom Line #3: Return on Assets (ROA) – Are We Using Our Equipment and Resources Efficiently?

Restoration businesses are asset-heavy—you need trucks, dehumidifiers, air movers, and extractors to do your job. But just owning assets doesn’t mean they’re helping your business succeed.

Return on Assets (ROA) measures how efficiently you’re using your investments to generate profit.

ROA=Net IncomeTotal Assets×100

If your ROA is low, it could mean:

• You’ve invested too much in underutilized equipment.

• Your assets aren’t generating enough revenue to justify their cost.

• You’re holding onto outdated or unnecessary equipment that ties up cash.

How to Improve ROA:

• Track equipment utilization – If some equipment sits unused most of the year, consider renting instead of owning.

• Avoid unnecessary purchases – Before buying a new truck or extractor, ask, Will this directly increase revenue, or am I just accumulating more stuff?

• Sell underutilized assets – If you’re not using it, turn it into cash.

The key takeaway: A restoration business with high net profit and strong cash flow can still fail if it’s tying up too much money in underperforming assets.

Bringing It All Together: The Three Bottom Lines in Action

If you only focus on net profit, you might miss the fact that your business is cash-starved or wasting resources. If you only track cash flow, you might not realize you’re underpricing jobs and squeezing your margins. If you only measure ROA, you might miss profitability issues.

The real magic happens when you manage all three together:
Net Profit ensures your business makes money.
Operating Cash Flow keeps your business running smoothly.
Return on Assets helps you use resources efficiently.

Kiwi Cash Flow helps restoration businesses take control of their finances with clear financial insights, budget forecasting, and KPIs. By tracking all three bottom lines, you can grow strategically, avoid cash crises, and ensure your business is financially strong—today and in the future.

Want to make sure your business is hitting all three bottom lines? Schedule a call with us at Kiwi Cash Flow and let’s get your numbers working for you!

Why Operating Cash Flow is the Lifeline of Your Restoration Business

Restoration businesses don’t fail because they’re unprofitable—they fail because they run out of cash.

It’s easy to focus on revenue and profit, but profit alone doesn’t pay the bills. What truly keeps your business afloat is operating cash flow—the money actually moving in and out of your business from your core restoration services.

If you’ve ever found yourself wondering:

• “Why am I making money but still struggling to pay my bills?”

• “How can I grow my business without running out of cash?”

• “Why does it feel like I’m always waiting on payments before I can move forward?”

Then it’s time to take a closer look at your Operating Cash Flow (OCF).

What is Operating Cash Flow (OCF)?

Operating Cash Flow (OCF) is the money your business generates from its day-to-day operations—not from loans, not from selling equipment, just from the work you do. It’s a direct reflection of how well your business turns revenue into actual cash in the bank.

Here’s the formula:

OCF=Net Income+Non-Cash Expenses−Changes in Working Capital\text{OCF} = \text{Net Income} + \text{Non-Cash Expenses} - \text{Changes in Working Capital}OCF=Net Income+Non-Cash Expenses−Changes in Working Capital

In simpler terms, it measures how much cash your business produces after covering operational expenses like payroll, materials, rent, and utilities.

Why is OCF Critical in the Restoration Industry?

Restoration is a cash-intensive business. You pay your crews, buy materials, and keep equipment running—often long before you get paid. Insurance work, in particular, can leave you waiting weeks (or months) for reimbursement.

A healthy positive OCF means you have enough cash coming in to cover daily operations without relying on loans or credit. A negative OCF is a warning sign that your business may be running on borrowed time, struggling to cover expenses while waiting on payments.

Signs Your Operating Cash Flow Needs Attention

• You’re constantly waiting on payments to pay bills – If cash only flows when checks arrive, your business is at risk.

• You rely on credit cards or loans for routine expenses – Short-term borrowing might keep things moving, but it’s a red flag if it’s the only way to stay afloat.

• Payroll is stressful – If making payroll feels like a juggling act, your cash flow needs serious attention.

• Your profits look good, but your bank account doesn’t – Profitability on paper means nothing if the cash isn’t there when you need it.

How to Improve Your Operating Cash Flow

If cash flow feels tight, there are steps you can take to strengthen it:

1. Get Paid Faster

• Send invoices immediately after completing work.

• Follow up on outstanding payments aggressively.

• Offer early payment discounts to encourage quicker payments.

• Require deposits or progress payments on larger jobs.

2. Manage Expenses More Effectively

• Negotiate better payment terms with suppliers to delay outflows.

• Cut unnecessary expenses that aren’t driving revenue.

• Consider leasing equipment instead of large upfront purchases if cash is tight.

3. Plan for Cash Flow Gaps

• Build a cash reserve to handle slow months.

• Use a rolling cash flow forecast to anticipate shortages.

• Diversify your revenue sources to avoid dependency on a few large clients.

4. Track and Understand Your Cash Flow Metrics

• Monitor days sales outstanding (DSO) to see how long it takes customers to pay.

• Keep an eye on your accounts receivable turnover—the faster you collect, the healthier your cash flow.

• Watch your cash conversion cycle to understand how long it takes to turn jobs into actual cash.

Making Cash Flow Work for You

Your Operating Cash Flow is more than just a number—it’s a signal of financial health, stability, and growth potential. The best restoration businesses don’t just track cash flow; they actively manage it.

Kiwi Cash Flow helps restoration businesses take control of their finances with clear financial insights, budget forecasting, and KPIs. When you understand your cash flow, you can make smarter decisions, grow with confidence, and ensure you never run out of cash when you need it most.

Want to get a grip on your cash flow and stop stressing over finances? Schedule a call with us at Kiwi Cash Flow to gain control over your cash flow today!

Are Your Assets Pulling Their Weight? Understanding Return on Assets in the Restoration Industry

In business, we tend to notice return on investment in certain places. We see it when a marketing campaign brings in more leads than expected. We feel it when a new hire becomes a rockstar employee. But when it comes to the money we've sunk into trucks, dehumidifiers, and extractors, it's easy to lose track of whether those investments are truly working for us.

Why? Because in the day-to-day chaos of running a restoration business—managing jobs, responding to emergencies, dealing with insurance headaches—we rarely stop to ask: Are our assets actually generating the returns we expect, or are they quietly draining our cash flow?

That’s where Return on Assets (ROA) comes in. This key metric tells you if your business is operating efficiently or if your investments in equipment and infrastructure are just sitting idle, eating up capital that could be better spent elsewhere.

What Is Return on Assets (ROA), and Why Should You Care?

ROA is a financial efficiency measure that tells you how much profit your business generates for every dollar invested in assets. The formula is simple:

ROA=(Net Income/Total Assets)×100

A high ROA means you’re squeezing solid returns out of your trucks, drying equipment, and tools. A low ROA? That’s a red flag that you may be over-invested in assets that aren’t pulling their weight.

In other words, just because you own it doesn’t mean it’s making you money.

Why ROA Matters in the Restoration Industry

Most service-based businesses can keep overhead low by relying on labor. Restoration, however, is different. It’s an asset-heavy industry. You can’t dry out a flooded home without dehumidifiers. You can’t haul equipment to a fire damage site without a reliable fleet.

But every asset you own has costs—maintenance, depreciation, financing, storage—and if those costs aren’t offset by strong revenue, they’re quietly eating into your bottom line.

And when we talk about bottom lines, let’s not forget that business isn’t just about total revenue—it’s about three bottom lines:

1. Profitability (Are we making money?)

2. Efficiency (Are we using our resources wisely?)

3. Sustainability (Are we making decisions that keep us financially healthy in the long run?)

ROA is a direct reflection of the second bottom line—efficiency. It tells you whether you’re maximizing what you already have, or if your business is unnecessarily bloated with equipment and expenses.

What’s a Good ROA for a Restoration Business?

In the restoration industry, a healthy ROA generally falls between 10-20%.

• If you’re below 10%, you likely have underutilized equipment, excess assets, or a pricing model that isn’t fully accounting for your overhead.

• If you’re above 20%, you’re running a lean, high-performing operation where every dollar invested in assets is pulling its weight.

  ROA and Smart Purchasing Decisions: When Is It the Right Time to Buy?

  One of the biggest mistakes restoration business owners make is buying equipment based on gut feeling instead of financial strategy. Sure, having the latest tools and an extra truck in the fleet sounds great—but does it actually make sense for your bottom line?

  This is where Return on Assets (ROA) should guide your decisions. Before making a big purchase, ask yourself:

  • How will this asset increase revenue? Will it allow you to take on more jobs, reduce outsourcing costs, or improve efficiency enough to generate a clear return?

  • Will the increase in revenue justify the cost? A new piece of equipment might make your life easier, but if it doesn’t significantly impact profitability, it’s just another expense.

  • Is leasing or renting a better option? If the equipment will only be used occasionally, renting might be the smarter move to avoid tying up cash in underutilized assets.

  • What’s the impact on your ROA? If your ROA is already low, adding more assets without increasing profitability could drag it down even further. Instead of expanding your fleet or buying more drying equipment, it might be time to focus on better utilizing what you already own.

  By factoring ROA into your purchasing decisions, you avoid the common trap of accumulating assets that look good on paper but hurt your efficiency. A strong ROA means every asset you own is actively driving profitability—and that’s the goal.

Boosting Your ROA: How to Make Your Assets Work Harder

If your ROA isn’t where you want it, you’re not stuck. Here are five ways to improve it:

1. Put Idle Equipment to Work – If your dehumidifiers or air movers are sitting around more often than they’re being used, consider renting them out or taking on more jobs that require them. (We realize this may be easier said than done.)

2. Rethink Your Buying Strategy – Before purchasing another piece of equipment, ask: Will this directly increase revenue, or am I just accumulating more stuff? Leasing or renting might be a smarter move in some cases.

3. Dial In Your Pricing – If you’re not fully factoring equipment costs into your job pricing, you’re eating away at your profit margin. Make sure your bids reflect the true cost of owning and operating your assets.

4. Improve Scheduling & Utilization – A poorly scheduled job backlog can leave assets sitting idle. If you can smooth out job timing and reduce gaps, you’ll make better use of what you already own.

5. Monitor Equipment Maintenance Costs – Hanging onto aging, high-maintenance equipment might seem like a cost-saving move, but frequent repairs and downtime can actually reduce efficiency. Know when to cut your losses and upgrade strategically.

Final Thoughts

Your equipment and assets should be profit drivers, not financial deadweight. But in the day-to-day rush of running a restoration business, it’s easy to lose sight of how efficiently those assets are actually working for you.

That’s why tracking Return on Assets (ROA) is so important. It forces you to step back from the chaos and ask: Are my assets generating real returns, or are they holding my business back?

If your ROA is on the lower side, take it as a wake-up call to make smarter investment decisions, optimize asset utilization, and stop throwing money at equipment that isn’t pulling its weight.

Want to make sure your financial strategy is working as efficiently as possible? Schedule a call with Ledger Management, and let’s fine-tune your numbers for maximum profitability.

How to Do Job Costing for Contractors: A Step-by-Step Guide

Job costing is one of the most essential tasks for any contractor, whether you’re in construction, water restoration, or another service-based industry. Knowing how much a job will cost, and then tracking those costs as they occur, helps you stay profitable, avoid overruns, and make informed decisions on future projects. If you're new to job costing or need a refresher, this guide will walk you through the key steps.

What is Job Costing?

Job costing is the process of tracking all the costs associated with a specific project. For contractors, this includes labor, materials, and overhead—basically everything that goes into completing a job. Effective job costing allows you to compare your estimated costs with the actual expenses, helping you understand your margins and profitability for each project.

Why is Job Costing Important for Contractors?

• Improved Profit Margins: Accurate job costing ensures that you’re not underpricing your services or losing money on unexpected costs.

• Better Estimations: It helps refine future estimates for similar jobs by providing real data from past projects.

• Accountability: You can track where and how your resources are being used, making it easier to hold your team accountable.

• Cash Flow Management: Job costing helps with better planning and cash flow management, ensuring that you can cover the costs as they occur.

Step-by-Step Job Costing Process for Contractors

1. Identify Direct Costs

The first step in job costing is identifying the direct costs associated with a job. These include:

• Materials: Every piece of equipment, tool, or material you use for the job, from nails to heavy machinery. Ensure you account for delivery and any handling costs as well.

• Labor: Track your labor costs, including wages, overtime, and any associated taxes and benefits. This is where tools like a labor burden calculator come in handy. Don’t forget to account for any subcontractor costs.

• Equipment and Machinery: If you're renting or using specific equipment for the job, include those costs.

2. Factor in Indirect Costs (Overhead)

Overhead includes costs that are not directly tied to a single project but are necessary to keep your business running. These may include:

• Administrative costs

• Office rent and utilities

• Insurance

• Company vehicles

To allocate these costs, determine a percentage of overhead to apply to each project based on its size or duration.

3. Track Costs in Real Time

Once the project is underway, it's crucial to track costs as they occur. You can do this through:

• Project Management Software: Tools like QuickBooks Online, Buildertrend, or CoConstruct can help track materials, labor, and overhead for each project.

• Time Tracking for Labor: Use time tracking software or apps that integrate with your accounting system to log the hours your team spends on a job.

By tracking costs in real time, you'll avoid surprises at the end of the project and can course-correct if necessary.

4. Compare Actual Costs to Estimates

Once the job is complete, compare your estimated costs with the actual costs incurred. This is where job costing really shines—by understanding the discrepancies, you can refine your estimating process for future jobs.

If you notice a particular category, such as labor or materials, consistently running over budget, it may be time to revise your processes or renegotiate supplier contracts.

5. Evaluate Profitability

With your actual costs in hand, you can now calculate the profitability of the job. Subtract the total costs from the revenue to determine your profit margin. If the margin is smaller than expected, dig into where the overruns occurred.

Over time, this practice will help you identify the most profitable types of jobs and areas where you need to tighten control.

Tools for Accurate Job Costing

• Job Costing Software: QuickBooks Online and other accounting systems offer job costing modules that allow you to tag costs to specific jobs and run reports.

• Labor Burden Calculator: A tool like the one we’ve developed at Ledger Management helps you accurately calculate labor costs by factoring in not just wages, but also taxes, insurance, and other employee-related expenses.

• Time Tracking Apps: Ensure accurate tracking of labor hours to each job, particularly useful for businesses where labor is a significant portion of total costs.

Common Job Costing Mistakes to Avoid

• Not Tracking Indirect Costs: Don’t overlook overhead! Every job you complete shares in the cost of keeping your business running.

• Forgetting to Adjust Costs as Needed: Prices for materials or labor can fluctuate. Ensure that your estimates reflect the most current data, and update your cost projections throughout the project if needed.

• Not Reviewing Past Jobs: Use the data from completed jobs to refine your future estimates and identify patterns in overruns.

Final Thoughts

Job costing is essential for any contractor who wants to run a profitable, efficient business. By tracking your costs and comparing them to your estimates, you’ll have a clear understanding of where you’re making money—and where you might need to make adjustments. For contractors looking to streamline this process, Ledger Management offers bookkeeping and financial services specifically tailored to the unique needs of the industry.

Call to Action: Ready to refine your job costing process? Schedule a call with us today and let us help you take control of your project financials.

Understanding and Calculating Labor Burden: Why It Matters for Your Water Restoration Business

What Is Labor Burden?

An employee’s pay rate and their true cost to your business are not the same thing. Calculating labor burden involves adding all additional overheads involved in employing someone to their pay rate to work out their true cost. Many businesses lose money because they don’t correctly calculate their real labor cost for employing each of their workers. Understanding your labor cost is critically important if you are running a water restoration business because a large percentage of your project costs come from labor. If you don't do this correctly, you risk inaccurately bidding on jobs that could go way over budget, ultimately losing you money.

The Importance of Accurate Labor Cost Calculation

To ensure your water restoration company is profitable, you’ll need to apply strict controls over labor costs. But reconciling labor costs can be complicated. Factors like health care, benefits, training, and increased administrative overhead have made labor more expensive—and you’ll need to account for these additional expenses in your labor cost calculations.

Utilize Our Labor Burden Calculator

To identify your true labor costs, we've provided a free labor burden calculator that helps you calculate your labor burden for each employee. This tool simplifies the complex process of accounting for all the hidden costs of employment, ensuring your bids are accurate and your business remains profitable.

What Employee Costs Should Be Included in a Fully Burdened Labor Rate?

Labor burden needs to include the indirect costs of your labor—in other words, the cost of having that labor. Indirect labor cost typically includes:

• Payroll taxes including FICA, FUTA & SUTA

• Workers' compensation insurance

• Health insurance and other benefits

• Retirement benefits

• Paid leave

• Additional training or classes

• Safety gear, employee equipment, or employee supplies

• Annual overhead costs like time spent in meetings or commuting

It’s a common mistake to bid a job based solely on direct labor costs (the hourly wage). While the direct labor costs could be $20 an hour, the indirect labor costs could be closer to $30 or even $40 an hour. On average, an employee’s labor burden is 24%—or $0.24 on the dollar.

What Are Payroll Taxes?

As an employer, you’re required to pay taxes for the Federal Insurance Contributions Act (FICA), which covers Social Security and Medicare, and the Federal Unemployment Tax Act (FUTA), which funds labor-related agencies. In addition, you are required to pay state-level unemployment taxes (SUTA). Navigating these payroll taxes can feel very complicated, and if you get it wrong, you can easily end up in trouble with the IRS. Luckily, most modern payroll systems today automatically calculate payroll taxes for you and also take care of filing and paying these taxes to the government. When in doubt, it’s always a best practice to check with your accountant to ensure your taxes are being calculated and remitted correctly.

Typical Labor Burden Rates in Water Restoration

There is no typical labor burden rate for water restoration; it really depends on the type of projects and trades you are hiring, although rates tend to be higher due to workers' compensation insurance rates being higher than in other industries. The biggest factors tend to be your workers' compensation insurance rates and whether you are a union contractor versus working on private projects. Employers can pay 30, 40, and even 50% of an employee’s hourly wage in indirect costs. For union contractors, the labor burden rate for employee costs ranges from 60 to 70%. There are typical contractor overhead and profit margins you should be aware of that you can use as a benchmark for your specific business.

Improve Your Estimating by Calculating Labor Burden Accurately

Using your labor burden rate when estimating projects will help correctly identify exactly how much a project will actually cost. Imagine you are estimating a project for 10 workers and don’t account for indirect costs—that will sum up to a significant amount of money. Figuring the labor burden is crucial to achieving the margins you are aiming for in your estimates.

Once you are confident that your estimates reflect your true costs, the next step is to make sure you accurately track your actuals. Tracking and comparing your actuals to your estimates is the best way to ensure you hit your goals and also learn from your mistakes to improve future bids.

By understanding and calculating your labor burden accurately, you can ensure more profitable projects, better financial management, and a more sustainable business. Start using our labor burden calculator today to get a clear picture of your labor costs and improve your project bidding and profitability.

Understanding the Current Ratio: A Key Indicator of Financial Health

Hi, restoration contractors! I’m Michele Gray from Ledger Management. In our latest video, we discussed the importance of the Current Ratio and how it can help you gauge the short-term financial health of your business. If you haven't seen the video yet, be sure to watch it below:

https://www.youtube.com/shorts/WJuMOnJkrfI

What is the Current Ratio?

The Current Ratio is a key performance indicator (KPI) that measures your company’s ability to pay off its short-term liabilities with its short-term assets. In simpler terms, it helps you understand whether you have enough resources to cover your immediate obligations.

Why is the Current Ratio Important?

For restoration contractors, maintaining a healthy current ratio is crucial. This metric gives you insight into your business’s liquidity, ensuring that you can handle day-to-day expenses and unexpected costs without financial strain.

How to Calculate the Current Ratio

Calculating the Current Ratio is straightforward. You divide your current assets by your current liabilities. Here’s the formula:

Current Ratio = Current Assets / Current Liabilities

For example, if your current assets total $100,000 and your current liabilities are $50,000, your Current Ratio would be:

$100,000 / $50,000 = 2

A Current Ratio above 1 indicates that you have more assets than liabilities, which is a sign of good short-term financial health.

What is a Good Current Ratio?

• For Smaller, New Companies: Aim for a Current Ratio of at least 1.5. This provides a buffer to handle short-term obligations and unexpected expenses.

• For Established Businesses with Multiple Vans: Strive for a Current Ratio of 2 or higher. This ensures robust financial health and the ability to manage higher operational demands.

Monitoring Your Current Ratio

Regularly monitoring your Current Ratio helps you stay on top of your financial health. If you notice your ratio dropping, it might be time to take action. Consider strategies like increasing cash reserves or reducing short-term debt to improve your liquidity.

Understanding and managing your Current Ratio is essential for maintaining a financially healthy restoration business. By keeping a close eye on this KPI, you can ensure that your company is well-prepared to meet its short-term obligations and continue growing.

Need help assessing your Current Ratio or other financial metrics? Schedule a call with us today! Our team at Ledger Management is here to support you with expert financial management services tailored to restoration contractors.

Schedule a Call Today! https://calendly.com/ledgermanagement

What Are Some Critical KPIs for Water Restoration Businesses?

In the water restoration industry, keeping track of key performance indicators (KPIs) is essential for understanding the health of your business and making informed decisions. KPIs provide valuable insights into various aspects of your operations, from financial performance to customer satisfaction. At Ledger Management, we help water restoration businesses identify and monitor the most critical KPIs to drive success. Here are a few KPIs that you should be tracking.

1. Revenue Growth

Revenue growth is a fundamental KPI that measures the increase in your business’s income over a specific period. It helps you understand how well your business is expanding and whether your marketing and sales strategies are effective. Monitoring revenue growth allows you to identify trends and adjust your strategies accordingly to ensure continuous improvement.

2. Profit Margin

Profit margin is the percentage of revenue that remains after all expenses have been deducted. It is a critical indicator of your business’s financial health and efficiency. A higher profit margin indicates that your business is effectively managing its costs and generating a good return on revenue. Regularly reviewing your profit margins can help you identify areas where you can reduce costs and improve profitability.

3. Job Costing

Accurate job costing is vital for water restoration businesses. This KPI involves tracking the total costs associated with each project, including labor, materials, and overheads. By comparing actual costs to estimated costs, you can determine the profitability of individual projects and identify areas where you may be overspending. Effective job costing helps ensure that your pricing is accurate and that you are maintaining healthy profit margins on all projects.

4. Customer Satisfaction

Customer satisfaction is a crucial KPI that reflects the quality of your services and the likelihood of repeat business or referrals. You can measure customer satisfaction through surveys, reviews, and feedback forms. High levels of customer satisfaction indicate that your clients are happy with your work, which can lead to positive word-of-mouth and increased business. Monitoring this KPI helps you maintain a high standard of service and address any issues promptly.

5. Average Job Completion Time

The average job completion time measures the efficiency of your operations by tracking the time it takes to complete a project from start to finish. Shorter completion times can lead to increased customer satisfaction and the ability to take on more projects. By analyzing this KPI, you can identify bottlenecks in your processes and implement strategies to improve efficiency and reduce delays.

6. Employee Productivity

Employee productivity is a KPI that assesses the efficiency and effectiveness of your workforce. It can be measured by tracking the amount of work completed by each employee within a specific period. High productivity levels indicate that your employees are working efficiently and contributing to the success of your business. Monitoring this KPI helps you identify top performers, provide necessary training, and optimize workforce allocation.

7. Return on Marketing Investment (ROMI)

ROMI measures the effectiveness of your marketing efforts by comparing the revenue generated from marketing activities to the costs incurred. This KPI helps you understand which marketing strategies are delivering the best return on investment and where you should focus your efforts. By regularly reviewing your ROMI, you can make data-driven decisions to optimize your marketing budget and maximize your business growth.

Tracking these key KPIs is essential for the success and growth of your water restoration business. By regularly monitoring these indicators, you can gain valuable insights into your operations, make informed decisions, and implement strategies to improve performance. At Ledger Management, we specialize in helping water restoration businesses track and analyze their KPIs to drive success. We’d be delighted to see if we can be of service!

What Does an Outsourced Construction CFO Do?

In the fast-paced world of construction, managing finances effectively is crucial for the success of any project. However, many construction companies, especially smaller firms, might not have the resources to employ a full-time Chief Financial Officer (CFO). This is where an outsourced construction CFO comes into play. At Ledger Management, we specialize in providing outsourced CFO services tailored specifically for the construction industry. But what exactly does an outsourced construction CFO do?

Strategic Financial Planning

One of the primary roles of an outsourced construction CFO is to develop and implement strategic financial plans. This involves creating budgets, forecasts, and financial models that align with the company's long-term goals. By analyzing market trends, project costs, and revenue streams, an outsourced CFO helps construction companies plan for future growth and ensure financial stability.

Cash Flow Management

Cash flow is the lifeblood of any construction business. Managing it effectively is critical to keep projects running smoothly. An outsourced CFO monitors cash flow, ensures that there is enough liquidity to cover ongoing expenses, and identifies potential shortfalls before they become problematic. They also develop strategies to optimize cash flow, such as negotiating better payment terms with suppliers and clients.

Cost Control and Reduction

Construction projects often face cost overruns due to unforeseen circumstances or poor planning. An outsourced CFO plays a vital role in controlling and reducing costs by closely monitoring project expenses, identifying areas where savings can be made, and implementing cost-control measures. This proactive approach helps prevent budget overruns and improves overall profitability.

Financial Reporting and Analysis

Accurate and timely financial reporting is essential for making informed business decisions. An outsourced construction CFO ensures that all financial reports, such as balance sheets, income statements, and cash flow statements, are accurate and up to date. They also perform in-depth financial analysis to provide insights into the company's financial health, helping stakeholders understand the financial implications of their decisions.

Risk Management

Construction projects come with inherent risks, from fluctuating material costs to project delays. An outsourced CFO identifies and assesses these risks, developing strategies to mitigate them. This includes securing appropriate insurance coverage, implementing risk management policies, and preparing for potential financial setbacks.

Regulatory Compliance

The construction industry is subject to various regulations and compliance requirements. An outsourced CFO ensures that the company adheres to all relevant laws and regulations, including tax obligations, labor laws, and environmental standards. By staying compliant, construction companies can avoid costly fines and legal issues.

Technology and Systems Implementation

Modern construction companies rely on various financial and project management systems to streamline operations. An outsourced CFO can recommend and implement the right technology solutions to improve efficiency and accuracy in financial management. This includes selecting accounting software, project management tools, and other digital platforms that integrate seamlessly with the company's existing systems.

Financial Leadership and Support

Beyond the technical aspects of financial management, an outsourced construction CFO provides leadership and support to the company's finance team. They mentor and guide in-house staff, helping them develop their skills and ensuring that the finance department operates effectively. This leadership extends to collaborating with other departments, such as operations and project management, to align financial strategies with overall business objectives.

Conclusion

Outsourcing the CFO role offers construction companies access to high-level financial expertise without the overhead costs of a full-time executive. At Ledger Management, we understand the unique challenges of the construction industry and provide tailored CFO services to help businesses thrive. Whether it's strategic planning, cash flow management, cost control, or regulatory compliance, our outsourced CFO services are designed to enhance financial performance and drive business success.

If you're a construction company looking to strengthen your financial management, consider the benefits of partnering with an outsourced construction CFO. Schedule a call with us today through our Calendly link to learn how we can support your financial goals and help your business grow.

How to Calculate Days Sales Outstanding (DSO) and Why It Matters

Running a successful water restoration business involves more than just providing excellent service; it requires diligent financial management. One key metric that can significantly impact your cash flow and overall financial health is Days Sales Outstanding (DSO). At Ledger Management, we specialize in providing bookkeeping, CFO, and advisory services tailored for water restoration contractors. In this blog post, we’ll explain how to calculate DSO and why it's crucial to keep an eye on this important metric.

What is Days Sales Outstanding (DSO)?

Days Sales Outstanding (DSO) measures the average number of days it takes for a company to collect payment after a sale has been made. Essentially, it indicates how efficient your business is at collecting receivables. A lower DSO means quicker collections and better cash flow, while a higher DSO can indicate potential issues with your accounts receivable process.

How to Calculate DSO

Calculating DSO is relatively straightforward. Here’s the formula:

DSO=(Accounts ReceivableTotal Credit Sales)×Number of DaysDSO=(Total Credit SalesAccounts Receivable​)×Number of Days

To break it down:

1. Accounts Receivable: This is the total amount of money owed to your business by customers for sales made on credit.

2. Total Credit Sales: This is the total value of sales made on credit during a specific period.

3. Number of Days: The number of days in the period you’re measuring (usually a month, quarter, or year).

Step-by-Step Calculation

Let’s walk through an example. Suppose your water restoration business has:

• Accounts Receivable: $150,000

• Total Credit Sales for the month: $300,000

• Number of Days in the month: 30

Using the formula:

In this example, it takes your business an average of 15 days to collect payment after a sale.

Why DSO is Important

1. Cash Flow Management

Cash flow is the lifeblood of any business. A lower DSO indicates that your business is quickly converting sales into cash, which is essential for paying bills, salaries, and investing in growth opportunities. Conversely, a high DSO can strain your cash flow, making it difficult to meet financial obligations.

1. Customer Credit Risk

DSO provides insights into your customers' payment behaviors. A consistently high DSO might indicate that some customers are struggling to pay on time, which could suggest credit risk. By monitoring DSO, you can identify problematic accounts early and take steps to mitigate risk, such as adjusting credit terms or implementing stricter credit policies.

1. Operational Efficiency

A low DSO often reflects efficient billing and collections processes. It shows that your invoicing system is effective and your team is proactive in following up on outstanding payments. Improving operational efficiency in these areas can lead to a healthier cash flow and more stable financial position.

1. Financial Health

Investors, lenders, and other stakeholders closely watch DSO as an indicator of financial health. A lower DSO can make your business more attractive to potential investors and lenders, as it demonstrates effective cash management and financial stability.

Tips for Managing DSO

1. Streamline Invoicing Processes

Ensure invoices are sent out promptly and accurately. Automating your invoicing system can help reduce errors and speed up the billing process.

1. Implement Clear Credit Policies

Set clear credit policies and communicate them to your customers. Establish terms that incentivize early payments, such as offering discounts for prompt payments or charging interest on late payments.

1. Monitor Accounts Receivable Regularly

Regularly review your accounts receivable aging reports to identify overdue accounts. Proactively follow up with customers who have outstanding balances.

1. Offer Multiple Payment Options

Make it easy for customers to pay by offering various payment methods, such as credit cards, bank transfers, and online payment platforms.

Conclusion

Calculating and monitoring Days Sales Outstanding (DSO) is vital for maintaining a healthy cash flow and ensuring the financial stability of your water restoration business. By understanding and managing this key metric, you can improve your operational efficiency, reduce credit risk, and enhance your overall financial health.

At Ledger Management, we’re here to help you keep a close eye on important metrics like DSO. Schedule a free introductory call with us at https://calendly.com/ledgermanagement/45min to see how we can assist your water restoration business in achieving financial clarity and success.

Why Correctly Categorizing COGS is Crucial for Your Water Restoration Business

If you run a water restoration business, you know that every dollar counts. Keeping track of expenses and accurately reporting your financials can make or break your success. One of the most critical aspects of your financial management is properly categorizing your Cost of Goods Sold (COGS). At Ledger Management, we specialize in bookkeeping, CFO, and advisory services for water restoration contractors. Let's explore why it's so important to get COGS right and how it can impact your business.

Understanding COGS

First, let’s break down what COGS actually is. Cost of Goods Sold represents the direct costs associated with the production of the goods your company sells. For a water restoration business, this includes expenses such as labor, materials, equipment, and any other costs directly tied to your restoration projects.

Why Accurate COGS Categorization Matters

1. Precise Profitability Analysis

When you accurately categorize your COGS, you get a clear picture of your gross profit. Gross profit is calculated by subtracting COGS from your total revenue. This figure tells you how much money you're making after covering the direct costs of completing your projects. Misclassifying expenses can inflate or deflate your COGS, leading to misleading gross profit figures and making it difficult to understand your true profitability.

1. Better Pricing Decisions

Knowing your true COGS helps you price your services correctly. If you underestimate your COGS, you might set your prices too low, leading to razor-thin margins or even losses. Overestimating COGS might make your prices too high, driving potential customers away. Accurate COGS categorization ensures your pricing strategy covers all direct costs and leaves room for a healthy profit margin.

1. Improved Budgeting and Forecasting

Accurate COGS data is essential for effective budgeting and forecasting. Understanding your direct costs allows you to project future expenses and revenues more accurately. This helps you make informed decisions about resource allocation, hiring, and purchasing materials. It also enables you to set realistic financial goals and track your progress over time.

1. Tax Compliance and Optimization

Properly categorizing COGS is crucial for tax compliance. The IRS and other tax authorities require businesses to accurately report their COGS to calculate taxable income correctly. Misreporting COGS can lead to audits, fines, and penalties. Moreover, accurate COGS reporting can help you take advantage of tax deductions and credits, reducing your overall tax liability.

1. Enhanced Financial Reporting

Investors, lenders, and other stakeholders rely on your financial statements to assess your business's health. Accurate COGS categorization enhances the reliability of your financial reports, making your business more attractive to potential investors and lenders. It demonstrates that you have a solid grasp of your costs and profitability, boosting confidence in your management capabilities.

How to Ensure Accurate COGS Categorization

1. Track Direct Costs Meticulously

Keep detailed records of all direct costs associated with your projects. This includes labor, materials, equipment, and any subcontractor expenses. Use accounting software that allows you to track these costs accurately and link them directly to specific projects.

1. Regularly Review and Update Categories

Regularly review your expense categories to ensure they align with industry standards and your business operations. Update your categorization process as needed to reflect changes in your business or industry.

1. Consult with Financial Experts

Working with financial experts, like the team at Ledger Management, can help you navigate the complexities of COGS categorization. Our specialized services for water restoration contractors ensure your financial statements are accurate and compliant, giving you peace of mind and allowing you to focus on growing your business.

Conclusion

Accurate categorization of COGS is not just a bookkeeping task; it's a critical component of your business's financial health. It impacts your profitability analysis, pricing strategy, budgeting, tax compliance, and financial reporting. By getting COGS right, you can make more informed decisions, optimize your operations, and set your water restoration business up for long-term success.

At Ledger Management, we’re here to help you every step of the way. Schedule a free introductory call with us at https://calendly.com/ledgermanagement/45min to see how we can assist your water restoration business in achieving financial clarity and success.

Understanding Owner Pay in Water Restoration Contracting: COGS, Expenses, and Owner’s Compensation

Running a water restoration business is no walk in the park. From handling day-to-day operations to ensuring your clients get top-notch service, there's a lot on your plate. One critical aspect of your business is understanding how owner pay shows up on your financial statements. Here at Ledger Management, we specialize in providing bookkeeping, CFO, and advisory services just for water restoration contractors. Let's dive into the three main places where your pay as an owner might appear: Cost of Goods Sold (COGS), Expenses, and Owner’s Compensation.

1. Cost of Goods Sold (COGS)

Cost of Goods Sold (COGS) covers the direct costs of producing the goods your company sells. For water restoration contractors, this includes the cost of labor, materials, and other expenses directly tied to the restoration projects.

When Owner Pay Shows Up in COGS: If you, as the owner, are hands-on with the labor-intensive tasks of your projects, part of your pay might be listed under COGS. This is common if you're actively working on-site, supervising projects, or doing other billable activities.

Why It Matters: Putting owner pay in COGS gives a clearer picture of the true cost of completing a project. It also affects your gross profit, as higher COGS will lower your gross margin. This is crucial for pricing your services correctly and understanding how profitable each project is.

2. Expenses

Expenses, or operating expenses, are the costs incurred in the day-to-day running of your business that aren't directly tied to any specific project. This includes rent, utilities, marketing, office supplies, and salaries of administrative staff.

When Owner Pay Shows Up in Expenses: If your role as the owner is more about administration or management, your pay might be classified as an operating expense. This usually happens when you're focusing on business development, client relations, or other non-billable tasks that keep the business running smoothly.

Why It Matters: Classifying owner pay as an expense impacts your operating profit and net income. It's essential to understand this allocation to manage your overhead costs effectively and ensure your business's long-term sustainability.

3. Owner’s Compensation

Owner’s Compensation is a specific category that directly reflects the pay you receive as the owner. This can include a regular salary, dividends, bonuses, or other forms of compensation.

When Owner Pay Shows Up in Owner’s Compensation: When you draw a salary or receive dividends from the profits, it’s recorded as owner’s compensation. This category clearly separates the owner’s earnings from the business, distinct from operational and project-related expenses.

Why It Matters: Tracking owner’s compensation separately helps evaluate your business's overall profitability and financial health. It's also crucial for tax purposes since different types of compensation may be taxed differently. Properly distinguishing owner’s compensation ensures compliance and optimizes your tax strategy.

Wrapping It Up

Understanding where and how owner pay shows up on your financial statements is vital for accurate financial management and strategic decision-making. Whether it's in COGS, operating expenses, or categorized as owner’s compensation, each allocation impacts your business's financial picture differently.

At Ledger Management, we’re here to help water restoration contractors navigate these complexities with confidence. Our expertise in bookkeeping, CFO, and advisory services ensures your financial statements accurately reflect your business operations, helping you make informed decisions for growth and success.

For personalized advice and support, reach out to us at Ledger Management. Let us help you streamline your financial management and achieve your business goals. Schedule a free introductory call with us at https://calendly.com/ledgermanagement/45min to see how we can assist your water restoration business in achieving financial clarity and success.

Rain or Shine: Adaptable Bookkeeping for Any Weather

In the ever-changing climate of the water restoration industry, adaptability is not just a skill—it's a necessity. For fire and water restoration contractors, fluctuating workloads and unpredictable financial landscapes are as common as the weather changes. This makes adaptable bookkeeping an indispensable tool for navigating through both the sunny days and stormy nights of business. In this blog, we'll discuss how restoration contractors can implement flexible bookkeeping strategies to thrive in any weather.

The Unpredictable Nature of the Water Restoration Industry

The water restoration business is heavily influenced by environmental factors and unforeseen events. One day you might be dealing with a flood of calls due to a natural disaster, and the next, you could be experiencing a dry spell. This unpredictability demands a bookkeeping system that's as adaptable as the weather itself.

Key Elements of Adaptable Bookkeeping

1. Dynamic Cash Flow Management

Cash flow in the restoration business can be as unpredictable as a storm. Adaptable bookkeeping involves rigorous tracking and real-time analysis of cash flow, enabling businesses to stay afloat during dry periods and capitalize during busy times. It's about having a clear understanding of where your money is coming from and where it's going.

2. Responsive Budgeting and Forecasting

Adaptability in budgeting and forecasting means being able to quickly adjust your financial plans based on current business realities. This involves regularly reviewing and updating budgets to reflect changes in the market, such as a sudden increase in demand due to seasonal storms or other events.

3. Agile Invoicing and Accounts Receivable

In the restoration industry, timely invoicing and efficient collection are crucial for maintaining healthy cash flow. An adaptable bookkeeping system should facilitate prompt invoicing and active follow-up on receivables, ensuring that cash keeps flowing in even when the jobs aren't.

4. Scalable Financial Processes

As your business grows or goes through busy and slow periods, your bookkeeping processes should be able to scale accordingly. This means having systems in place that can handle an increased volume of transactions without compromising accuracy or efficiency.

5. Leveraging Technology for Flexibility

Modern bookkeeping software and cloud-based solutions offer unparalleled flexibility and accessibility. They allow you to manage your financials efficiently from anywhere, providing the agility needed to respond to changing business conditions swiftly.

How Ledger Management Can Help

Understanding the unique challenges of the water restoration industry, Ledger Management is here to offer tailored bookkeeping and CFO services that adapt to your business needs. Our team specializes in creating flexible, responsive financial management solutions that help restoration contractors weather any storm.

Whether you need assistance in managing fluctuating cash flow, adjusting your financial strategies, or implementing scalable bookkeeping systems, Ledger Management is your go-to expert.

Looking for Bookkeeping Solutions That Can Weather Any Storm?

If you're a restoration contractor in need of bookkeeping services that adapt as quickly as the weather changes, Ledger Management is here to assist. Visit us at https://www.waterrestorationbookkeeping.com/contact to find out how we can help you maintain financial stability and growth, rain or shine.

Cascades of Cash Flow: Effective Bookkeeping for Steady Income

In the water restoration industry, maintaining a steady cash flow can often feel like trying to capture a cascade in a cup. For fire and water restoration contractors, the influx of jobs can fluctuate greatly, leading to peaks and troughs in income. Effective bookkeeping is key to turning these unpredictable cascades into a steady stream of revenue. This blog post will explore how restoration contractors can harness bookkeeping practices to stabilize and enhance their cash flow.

The Challenge of Cash Flow in Water Restoration

The nature of the water restoration business is inherently erratic. Demand can surge unexpectedly in the wake of natural disasters or seasonal weather patterns, leading to a sudden influx of work. Conversely, there can be dry spells with minimal activity. This unpredictability makes managing cash flow a significant challenge for restoration contractors.

Strategies for Effective Bookkeeping in Water Restoration

Timely Invoicing and Receivables Management

Prompt invoicing and efficient management of receivables are crucial. The sooner invoices are sent out post-job completion, the quicker payments can be received. Implementing systems that streamline this process ensures that cash flow remains consistent.

Accurate Job Costing

Each restoration project comes with its own set of costs. Accurate job costing is essential to ensure that every project is profitable. This involves detailed tracking of expenses related to labor, materials, equipment, and overheads. Understanding the true cost of each job aids in setting appropriate prices and maintaining healthy margins.

Monitoring Cash Flow

Regular monitoring of cash flow helps in identifying trends and potential issues before they become problematic. It allows restoration contractors to plan for upcoming expenses and make informed decisions about investments and growth opportunities.

Flexible Financial Planning

In a fluctuating market, having a flexible financial plan is key. This means being able to adjust budgets and forecasts in response to changes in the business environment. Effective bookkeeping provides the data necessary to make these adjustments swiftly and accurately.

Leveraging Technology

Utilizing modern bookkeeping software can greatly enhance efficiency. These tools can automate many aspects of financial management, from invoicing to expense tracking, freeing up valuable time and resources.

How Ledger Management Can Help

At Ledger Management, we understand the unique challenges faced by fire and water restoration contractors. Our specialized bookkeeping and CFO services are designed to help manage and improve your cash flow, even in the most turbulent markets.

Our team of experts can assist with implementing efficient invoicing processes, accurate job costing, continuous cash flow monitoring, and flexible financial planning. We are committed to helping you turn the unpredictable cascades of income into a steady stream of financial success.

Need Assistance with Bookkeeping or Cash Flow Management?

If you're a restoration contractor in need of professional bookkeeping assistance or CFO services, Ledger Management is here to help. Visit us at https://www.waterrestorationbookkeeping.com/contact for expert support in managing and optimizing your cash flow.