Why Operating Cash Flow is the Lifeline of Your Restoration Business

Mar 16

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!

Michele Gray