The Complete Guide to Bookkeeping for Restoration Companies (2026)

By Cat3 Books · Restoration Bookkeeping Specialists. Updated May 2026.

Introduction

This guide is the definitive reference for bookkeeping in the insurance restoration industry. It covers every aspect of the financial record-keeping system a restoration company needs — from the initial chart of accounts setup through the monthly close process, including the specific workflows that make restoration bookkeeping different from any other industry.

Who this is for: Restoration company owners generating $500K–$7M in annual revenue, primarily through insurance-driven work (water damage, fire, mold, contents, rebuild). This guide assumes you use QuickBooks Online (QBO) as your accounting platform, which is the standard for this revenue range.

What this covers: Chart of accounts structure, job costing setup, insurance receivables workflow, supplement tracking, TPA fee treatment, equipment revenue reconciliation, labor burden, the monthly close process, and the key reports you need to run your business. It also covers common mistakes and the decision of when to hire specialized help.

What this does not cover: Tax strategy, payroll processing, or multi-entity structures. For those topics, see The Complete Guide to Restoration Company Financial Management.

The restoration industry generates approximately $15–20 billion in direct services revenue annually across 60,000–80,000 businesses. IBISWorld, 2024 Despite this scale, most restoration companies still run books that were designed for a general contractor — and the cost of that mismatch is measurable.

Why Restoration Bookkeeping Is Different

General bookkeeping assumes a simple revenue model: you do work, you invoice a customer, the customer pays. Restoration doesn't work this way. Revenue flows through insurance carriers, not customers, and it arrives in multiple tranches spread across weeks or months.

The Insurance Payment Cycle

A typical water damage job illustrates the complexity:

1. Initial estimate submitted — Xactimate scope sent to carrier or TPA
2. ACV payment received — Carrier pays the claim amount minus depreciation (Actual Cash Value), typically 30–45 days after approval
3. Work completed — Mitigation done, documentation submitted
4. RCV holdback released — Carrier releases the depreciation amount ("recoverable depreciation") after completion documentation is submitted, typically 45–90 days post-completion
5. Supplement submitted — Additional scope not in original estimate (code upgrades, hidden damage) submitted to adjuster
6. Supplement paid — Approved supplement amount received, 30–60 days after approval

For a single job, you might receive three separate checks over 90–180 days. Each check corresponds to a different AR record. A bookkeeper who doesn't understand this cycle will misapply payments, misstate AR balances, and produce a revenue figure that bears little relationship to what was actually earned.

The Xactimate Translation Problem

When an adjuster approves a $45,000 Xactimate estimate for fire restoration, that $45,000 is distributed across line items for demolition, cleaning, odor treatment, rebuild labor, rebuild materials, equipment, and overhead-and-profit (O&P). Each category belongs in a different QBO account. Without a systematic mapping process, all $45,000 lands in "Sales" — a single number that tells you nothing about where the margin actually is.

TPA Fee Structures

TPAs — Third Party Administrators like Contractor Connection, Alacrity, Code Blue, and Sedgwick — charge program fees (also called marketing fees or referral fees) that typically run 5–15% of job revenue depending on the program. These fees must be coded as cost of revenue, not operating expense.

The accounting distinction matters because:

• Gross margin measures revenue minus direct (job-level) costs
• If TPA fees land in operating expense, your gross margin is overstated
• You cannot see the true margin on TPA-routed jobs vs. direct jobs
• Every management decision based on gross margin is distorted

Equipment-Day Revenue

Mitigation work bills equipment — air movers, dehumidifiers, air scrubbers — by the day at rates established by Xactimate's regional pricing. A typical residential water job deploys 8–12 air movers for 3–5 days and 2–4 dehumidifiers for the same period. At standard rates, equipment revenue on a single residential job is often $1,500–$4,000.

Equipment days must be tracked from placement to removal, reconciled against the Xactimate billing, and posted to a separate revenue account. Without this reconciliation, equipment billing gaps of 15–25% are common. Cat3 Books client data, 2024–2025

The Restoration Chart of Accounts

The chart of accounts is the foundation of your bookkeeping system. Get it wrong and every transaction you post builds on a bad foundation. Most restoration companies inherit a general contractor COA that bundles too much and separates too little.

Income Accounts

The income section should separate revenue by two dimensions: service line (water, fire, mold, contents, rebuild) and revenue type (labor, materials, equipment, subcontractor-billed, O&P).

How you implement this depends on whether you use QBO Classes:

Option A: Class-based tracking (recommended for most $500K–$5M companies)

• Use a single income account per revenue type (Labor Revenue, Materials Revenue, Equipment Revenue, O&P Revenue)
• Use QBO Classes to tag each transaction with the service line
• Produces service-line P&L via the Class-filtered Profit & Loss report

Option B: Account-level separation (better for large operations without Class discipline)

• Use separate income accounts per service line × revenue type combination
• Results in more accounts but cleaner filtering in basic P&L reports
• Recommended for companies above $5M with internal accounting teams

Direct Cost (Cost of Revenue) Accounts

Direct costs are the costs that directly correspond to specific jobs. This section should include:

| Account | What it tracks | |---|---| | Labor — Field | Hours worked by W-2 employees on jobs (at loaded rate) | | Labor — Subcontractor | Payments to 1099 subcontractors for job-specific work | | Materials — Job | Materials purchased and consumed on specific jobs | | Equipment — Rental | Equipment rented for specific jobs (not owned equipment) | | Equipment — Depreciation Allocation | Portion of owned equipment depreciation allocated to jobs | | TPA Program Fees | Referral fees paid to Contractor Connection, Alacrity, Code Blue, etc. | | Disposal / Dump Fees | Per-job disposal costs | | Specialty Services | Testing, hygienist fees, specialized remediation contractors |

Critical: TPA Program Fees belong here — in direct costs — not in operating expenses. See the TPA Fee Handling section for the full treatment.

Operating Expense Accounts

Standard operating expenses follow normal bookkeeping conventions. Key restoration-specific additions:

| Account | Restoration note | |---|---| | Software — Estimating | Xactimate ($150–$350/user/month), Symbility | | Software — Job Management | Albi, Dash, JobNimbus, Encircle | | Software — Accounting | QBO subscription | | Vehicle — Fleet | Multiple work vehicles in restoration vs. general business | | Training — IICRC | Required certifications: WRT, ASD, AMRT, FSRT, OCT, CCT | | Insurance — GL | Higher rates for restoration due to mold and water risk | | Insurance — Workers Comp | $8–$18 per $100 of payroll for restoration techs NCCI, 2024 |

The Interplay Between COA and Reporting

The best COA is the one that produces the reports you actually need without manual aggregation. Before finalizing your structure, identify the three reports you run most: typically a Job-Level P&L, a Service-Line P&L, and a TPA Program P&L. Design the COA to produce all three directly from QBO filtered reports.

Job Costing Fundamentals

Job costing is the single most important financial practice for a restoration company. Without it, you can see your total revenue and total expenses but you cannot answer: which jobs made money? Which job types are most profitable? Is the water division pulling the fire division's margin down, or the other way around?

QBO Setup for Job Costing

Step 1: Choose your structure. QBO offers two approaches:

• Projects (recommended): Dedicated feature designed for job tracking. Supports time tracking, expense tracking, and profitability reports per project. Requires QBO Plus or Advanced.
• Sub-customers: The legacy approach. Works in any QBO tier but requires more manual management. Each job is a sub-customer under the insured's customer record.

Step 2: Create one record per job. Every job — whether it's a $5,000 water mitigation or a $250,000 commercial fire — needs its own QBO Project or sub-customer. The record name should include the claim number or job address for easy identification.

Step 3: Configure Items. Items are QBO's mechanism for linking transactions to the right income and expense accounts. Every invoice line item, every expense, every time entry must use an Item that posts to the correct account. A typical restoration Item list:

| Item name | Income account | COGS account | |---|---|---| | Water Mitigation Labor | Water Mitigation Revenue — Labor | Labor — Field | | Equipment — Air Mover | Water Mitigation Revenue — Equipment | (none — income item only) | | Equipment — Dehumidifier | Water Mitigation Revenue — Equipment | (none — income item only) | | Fire Restoration Labor | Fire Restoration Revenue — Labor | Labor — Field | | Rebuild Labor | Reconstruction Revenue — Labor | Labor — Field | | Subcontract Work | Pass-Through Revenue | Labor — Subcontractor | | TPA Program Fee | (not an income item) | TPA Program Fees |

Step 4: Code every transaction. Every time an employee logs hours, every material purchase, every subcontractor invoice, every equipment rental — all must be assigned to the specific job. This is where discipline matters. A single unbatched transaction breaks the job P&L.

Direct Cost Categories

A properly structured restoration job P&L has exactly four direct cost categories:

Understanding Loaded Labor Rate

The loaded labor rate is the true cost of an employee hour — not just the wage, but the full burden. Restoration companies consistently understate labor cost by using wage rates instead of loaded rates.

Loaded Rate Calculation:

| Component | Typical % of base wage | |---|---| | Base hourly wage | 100% | | Employer FICA (Social Security + Medicare) | 7.65% | | Federal unemployment (FUTA) | 0.6% | | State unemployment (SUTA) | 1–4% (varies by state) | | Workers' compensation insurance | 8–18% (restoration-specific, NCCI NCCI, 2024) | | Health insurance | 8–14% (if employer-paid) | | Paid time off (vacation, holiday, sick) | 5–10% | | Total loaded rate factor | ~130–155% of base wage |

A field technician earning $22/hour has a loaded cost of $28.60–$34.10/hour. Using $22 for your job costing understates labor cost by 30–55% and overstates job margins by a corresponding amount.

Insurance Receivables Workflow

The insurance receivables cycle is the most operationally complex part of restoration bookkeeping. Most restoration AR problems trace back to treating all three payment streams — ACV, holdback, and supplements — as a single undifferentiated receivable.

The Three-Stage AR Model

Stage 1: ACV Receivable

The ACV (Actual Cash Value) is the agreed claim value minus depreciation. The carrier pays this first, typically within 30–45 days of scope approval. Post an invoice to the job for the ACV amount when the scope is approved by the adjuster — not when work begins and not when payment arrives.

Example: $60,000 Xactimate scope. Depreciation: $12,000. ACV = $48,000. Post a $48,000 AR invoice when the carrier approves the scope.

Stage 2: RCV Holdback

The holdback is the depreciation amount ($12,000 in the example above) that the carrier releases after you document completion. Post this as a separate invoice when you submit the completion documentation — not when you receive it, but when you submit and can reasonably expect collection within 60 days.

Timing risk: Some carriers hold holdbacks for 90–120 days even after completion documentation. Your AR aging should flag any holdback over 60 days for follow-up.

Stage 3: Supplement Receivable

A supplement is additional scope not included in the original estimate — found damage, code upgrades, additional phases of work. Post a supplement AR invoice only after the supplement is approved by the carrier. Never post revenue on a submitted-but-unapproved supplement.

The supplement collection rate with a systematic tracking process is 85–92%. Without tracking, it falls to 65–75%. Cat3 Books client data, 2024–2025 The difference is the supplement backlog.

Handling Two-Party Checks

A common complication: insurance carriers frequently issue two-party checks made payable to both the property owner and the contractor. This requires the property owner's endorsement before deposit.

Workflow:

1. Receive the check
2. Contact the property owner to arrange endorsement (in-person or via mail)
3. Deposit after endorsement
4. Apply to the appropriate AR invoice in QBO

The accounting is unchanged. A two-party check is applied to the same AR invoice as a single-party check. The complication is operational, not bookkeeping. Build endorsement follow-up into your AR aging review — if a check has been issued by the carrier but not yet deposited, it should appear as a note in your AR system.

Mortgage Company Involvement

For owned properties with a mortgage, the lender may need to co-sign checks or hold escrow funds. When a mortgage company holds insurance proceeds:

1. The funds are in escrow — not yet your receivable
2. Draw requests must be submitted to the lender as work progresses
3. Each draw release is applied to your open AR invoice

Post the original AR invoice for the full amount when scope is approved. Apply partial payments as each draw is released. The outstanding balance is your true receivable. Escrow holds over 90 days without draws should be flagged for follow-up with the lender.

Supplement Tracking in the Books

Supplements are the most consistently under-managed revenue stream in restoration. They're also among the most significant: a $2M restoration company with 15% supplement rate and 75% collection (vs. 90% with tracking) is leaving $45,000/year uncollected.

The Supplement Tracking Log

Every restoration company needs a supplement tracking log. At minimum, this includes:

| Field | Purpose | |---|---| | Job identifier | Links to QBO project/sub-customer | | Supplement # | Sequential, for reference | | Date submitted | Starts the clock on carrier response time | | Submitted to | Adjuster name, carrier, TPA | | Submitted amount | Xactimate or written scope value | | Status | Pending / Approved / Denied / Partial | | Approved amount | Confirmed by carrier | | Date approved | For calculating time-to-approval | | Date invoiced | When posted to QBO AR | | Date collected | When cash received |

This log can live in a spreadsheet, a CRM, or your job management platform (Albi, Dash, JobNimbus). What matters is that it exists, is updated in real time, and is reconciled against QBO AR monthly.

Revenue Recognition Timing

The rule: Recognize supplement revenue when the carrier approves the supplement — not when you submit it and not when you collect it.

This is an accrual-basis treatment. The receivable exists at approval; the cash collection timing is separate. The reason this matters: if you recognize supplements on submission, you'll overstate income on supplements that later get denied. If you recognize on cash receipt, you'll understate income in the period the work was completed.

Supplement AR Aging by Status

In addition to your standard AR aging report (0–30, 31–60, 61–90, 90+ days), run a supplement-specific aging that groups open supplements by status:

• Pending (submitted, no response): Flag any over 30 days for follow-up
• Approved, not invoiced: Should be zero — invoice immediately on approval
• Invoiced, not collected: Standard AR aging treatment
• Denied, not appealed: Decision point — appeal or write off

TPA Fee Handling

TPA programs are among the most mishandled items in restoration bookkeeping. The typical error: TPA fees land in "Contractor Expenses" or "Marketing Expenses" under operating expenses, which overstates gross margin and makes TPA-routed jobs look more profitable than they are.

Why Classification Matters

Consider two jobs, both $10,000 revenue, both $4,500 direct labor cost:

| | Direct Job | Code Blue Job (10% fee) | |---|---|---| | Revenue | $10,000 | $10,000 | | Direct labor | $4,500 | $4,500 | | TPA fee (in COGS) | $0 | $1,000 | | Gross profit | $5,500 (55%) | $4,500 (45%) |

If the TPA fee is coded to operating expenses:

| | Direct Job | Code Blue Job (fee misclassified) | |---|---|---| | Gross profit (reported) | $5,500 (55%) | $5,500 (55%) — WRONG | | Operating expense | $0 | $1,000 |

Both jobs show the same gross margin. The difference only appears in operating income. This makes it impossible to answer: "Is our Code Blue work actually profitable, net of the program fee?"

For a company with 50% TPA dependency at 10% average fee, this misclassification overstates gross margin by 5 percentage points across the entire company.

The Correct QBO Setup for TPA Fees

1. Create an expense account: TPA Program Fees (under Cost of Revenue / Cost of Goods Sold)
2. Create a sub-account for each program: TPA Fees — Contractor Connection, TPA Fees — Alacrity, etc.
3. When a TPA program invoice arrives (usually monthly), allocate it to the individual jobs it relates to using QBO's expense coding
4. If TPA fees are deducted from payment (some programs net-settle), code the fee as an expense and the gross amount as revenue — never net them

Benchmarking TPA Fee Impact

For a $3M company with 60% TPA work and a blended 8% fee rate: TPA fees represent $144,000/year in direct costs. If misclassified as operating expense, gross margin is overstated by 4.8 percentage points. That's the difference between appearing to have a 42% gross margin (accurate) and a 47% gross margin (overstated).

Equipment Revenue and Labor Burden

Equipment Revenue Tracking

Equipment revenue is generated every time mitigation equipment runs on a job site. The billing mechanism is the Xactimate estimate line item for each piece of equipment per day.

Standard Xactimate equipment rates (approximate regional averages):

| Equipment | Typical daily rate (Xactimate) | |---|---| | Air mover — standard | $30–$45/day | | LGR dehumidifier | $75–$120/day | | Air scrubber | $40–$65/day | | Truck-mounted extractor | $100–$200/day | | Desiccant dehumidifier | $120–$200/day | | Negative air machine | $55–$85/day |

A residential water loss with 10 air movers and 3 dehumidifiers running for 4 days generates $1,200–$1,800 in equipment revenue from air movers alone, plus $900–$1,440 in dehumidifier revenue. Missing 20% of this billing (a common gap without reconciliation) costs $420–$648 on a single residential job — at scale, this is $40,000–$100,000/year for a $2M mitigation operation.

The reconciliation workflow:

1. On job close, pull the equipment log from your drying documentation system
2. Compare every equipment entry (piece, start date, end date) to the corresponding Xactimate line items
3. Flag any days where equipment ran but wasn't billed in Xactimate
4. Submit an equipment-day supplement if the gap is significant

Labor Burden Calculation

Loading your labor rate for job costing requires calculating the full burden factor for your workforce. The components:

| Burden component | Typical rate | Notes | |---|---|---| | Employer FICA | 7.65% of wages | Fixed by law | | FUTA | 0.6% of first $7,000/employee | Low but real | | SUTA | 1–4% of wages | Varies by state and claim history | | Workers' compensation | 8–18% of wages | Highest in industry: NCCI code 9519 (water damage) NCCI, 2024 | | Health insurance | 8–14% if employer-paid | Often $400–$700/employee/month | | Paid time off | 5–10% of wages | Vacation, holiday, sick time | | Total burden | ~130–155% | Applied to base wage |

Practical approach: Calculate a blended burden rate for your field workforce annually. If your average field tech earns $24/hour and your burden rate is 38%, your loaded rate is $24 × 1.38 = $33.12/hour. Use this rate when estimating labor cost for job P&L.

The Monthly Close Process

The 12-Step Monthly Close

Week 1 of the following month (Days 1–7):

Step 1: Bank reconciliation Reconcile every bank account in QBO against the bank statement. Every transaction must match. Unreconciled items over $500 require explanation before proceeding.

Step 2: Credit card reconciliation Same process for every company credit card. Code every charge to the correct job (if direct) or expense account (if overhead).

Step 3: Post outstanding AP Enter all vendor bills received during the month that haven't been posted. This includes subcontractor invoices, material bills, equipment rental invoices, and TPA program fee invoices.

Step 4: Apply AR payments Apply all cash received during the month to the corresponding AR invoices. Flag any unmatched deposits for investigation — in restoration, unmatched deposits often represent holdbacks or supplements that were collected without a corresponding invoice in QBO.

Week 2 of the following month (Days 8–15):

Step 5: Equipment-day reconciliation For every job closed during the month, pull the equipment log and reconcile against Xactimate billing. Log any gaps and determine if a supplement is warranted. This step is restoration-specific and takes 15–30 minutes per closed job.

Step 6: Supplement log reconciliation Review the supplement tracking log. Post any approved supplements that haven't been invoiced yet. Update status on pending supplements. Flag any supplement over 30 days without a carrier response for follow-up.

Step 7: TPA fee coding review Confirm that all TPA program invoices for the month have been received and coded to cost of revenue. Some programs bill quarterly — track those on a separate schedule and accrue monthly.

Step 8: Job-level P&L review Run a P&L by job for all closed jobs in the month. Review gross margin for each job against the job type benchmark (water: 35–50%, fire: 30–45%, etc.). Flag any outliers — jobs with margin under 20% or over 60% usually have a posting error.

Step 9: Service-line P&L review Run a Class-based P&L to see gross margin by service line. Compare month-over-month and year-over-year for any anomalies.

Step 10: TPA program AR aging Run AR aging filtered to each TPA program. Flag any ACV receivable over 45 days. Flag any holdback over 90 days post-completion. These are collection action items.

Step 11: Cash flow actual vs. forecast Compare actual cash receipts and disbursements against the 13-week forecast (if you have one). Note variances. Update the next 13 weeks with actual data. See the cash flow forecasting guide for setup details.

Step 12: Deliver the owner's monthly package The monthly package includes: Job-Level P&L, Service-Line P&L, TPA AR Aging, Cash Flow Summary, and an executive commentary highlighting any anomalies. Should be in the owner's hands by the 15th.

Key Reports Every Restoration Owner Needs

Report 1: Job-Level P&L

The job P&L is the most important financial report in restoration. It shows, for every closed job:

• Total revenue (ACV + collected holdback + collected supplements)
• Direct labor cost (hours × loaded rate)
• Direct materials cost
• Subcontractor costs
• Equipment costs (if separately tracked)
• TPA fee (if applicable)
• Gross profit and gross margin %

What to look for: Jobs with margin below 20% are worth investigating. Jobs over 60% may have direct costs not yet posted. Compare jobs of the same type — a fire job at 28% margin when your average is 38% warrants a review.

Report 2: Service-Line P&L

Using QBO Classes, run a P&L filtered by service line. This tells you:

• Which division (water, fire, mold, contents, rebuild) generates the most revenue
• Which division generates the best margins
• Whether one division is subsidizing another

Industry gross margin benchmarks by service line: RIA Cost of Doing Business Report, 2024

| Service Line | Typical Gross Margin | |---|---| | Water mitigation | 35–50% | | Fire restoration | 30–45% | | Mold remediation | 35–55% | | Contents restoration | 40–55% | | Reconstruction / rebuild | 18–28% |

Report 3: TPA Program AR Aging

This report shows your outstanding insurance receivables organized by TPA program and aged by time:

| TPA Program | 0–30 days | 31–60 days | 61–90 days | 90+ days | |---|---|---|---|---| | Contractor Connection | $42,000 | $18,000 | $7,500 | $3,200 | | Alacrity | $28,500 | $11,000 | $4,200 | $0 | | Code Blue | $15,000 | $8,500 | $12,000 | $5,800 | | Direct carrier | $67,000 | $31,000 | $8,000 | $2,500 |

Items over 60 days are collection action items. Items over 90 days may need escalation to the TPA's contractor relations team.

Report 4: Cash Flow Actual vs. Forecast

See the 13-week cash flow guide for setup. The key comparison: projected cash receipts from insurance (based on AR aging) vs. actual cash received. When the gap widens, AR collections are slowing — investigate which programs are lagging.

Common Bookkeeping Mistakes

Mistake 1: TPA Fees in Operating Expenses

What happens: Program fees from Contractor Connection, Alacrity, Code Blue et al. are posted to "Contractor Fees," "Marketing Expense," or "Professional Services" — below gross profit.

Cost: Gross margin is overstated by 3–6% for companies with 50%+ TPA work. Management decisions based on gross margin are made with inflated data.

Fix: Create a TPA Program Fees account under Cost of Revenue. Reclassify historical entries.

Mistake 2: No Job-Level P&L

What happens: All revenue posts to a single income account. All direct costs post to a single COGS account. The result is a company-level gross margin with no visibility into individual job performance.

Cost: Cannot identify unprofitable job types or TPA programs. Cannot answer which jobs made money.

Fix: Enable QBO Projects or sub-customer tracking. Rebuild COA with job-coding requirements.

Mistake 3: ACV and RCV Treated as One

What happens: The full Xactimate estimate amount is booked as a single AR invoice at job start. When ACV is received, it's partial payment against the full amount. Holdback sits in AR without distinguishing it from ACV.

Cost: AR aging is meaningless — it can't tell you what's ACV (should be collected) vs. holdback (timing is normal) vs. overdue.

Fix: Create separate invoice types for ACV, holdback, and supplements. Post each as work stage is reached.

Mistake 4: Supplement Revenue Recognized Before Approval

What happens: Supplements are posted as income when submitted to the carrier, not when approved.

Cost: Revenue is overstated in periods with high supplement submissions. Income is understated in periods of actual collection. Tax liability may shift timing. Books don't reflect actual economic reality.

Fix: Post supplement invoices only on carrier approval. Use the supplement log to track submitted-not-yet-approved amounts separately.

Mistake 5: Raw Wages vs. Loaded Rate

What happens: Job costing uses the employee's base wage to calculate labor cost. Workers' compensation (8–18% of wages in restoration), payroll taxes (7.65%), and benefits (10–25%) are not included.

Cost: Labor cost on every job is understated by 30–55%. Job margins are overstated by the corresponding amount.

Fix: Calculate a loaded rate annually. Update it if wage rates or workers' comp classification changes.

Mistake 6: Equipment Revenue Not Tracked

What happens: Equipment revenue (air movers, dehumidifiers) is lumped into general revenue. Equipment-day reconciliation is not performed before job close.

Cost: The equipment billing gap in companies without reconciliation habits averages 15–25% of equipment revenue, representing $40,000–$100,000/year for a $2M mitigation company.

Fix: Create an Equipment Revenue income account. Implement a job-close equipment reconciliation checklist. See the equipment reconciliation guide.

Mistake 7: Late Closes

What happens: The monthly close doesn't happen until 30–45 days after month end.

Cost: Management decisions in the current month are made with the previous month's data — which itself may be a month old. For a fast-moving restoration company, this is flying blind.

Fix: Build the 12-step close process into your (or your bookkeeper's) calendar. Enforce the 15th-of-the-month close deadline contractually if using an outsourced provider.

When to Hire Help

The Revenue-Stage Guide

Under $300K: Manage books yourself with a proper QBO setup. Invest in a one-time chart-of-accounts setup from a restoration specialist ($1,500–$3,000). Hire a part-time bookkeeper only if you genuinely lack the time.

$300K–$700K: The gray zone. Consider outsourcing if you run more than two TPA programs, have more than 8 jobs per month, or find yourself spending more than 3 hours/week on bookkeeping.

$700K–$3M: Outsource to a restoration specialist. The economics are clear: flat-rate specialized outsourcing runs $12,000–$24,000/year for full bookkeeping with job costing. In-house with comparable capability costs $52,000–$82,000/year. You get more for less.

$3M–$7M: Continue outsourcing or bring in a part-time controller with restoration experience. Begin thinking about a Fractional CFO for strategic financial management. See the Fractional CFO decision framework.

Above $7M with complexity: Full-time controller or director of finance, reporting to a Fractional CFO or full-time CFO. Multiple entities require a more sophisticated organizational structure.

The Three-Question Test

Before deciding to change your bookkeeping setup, run this test on your current bookkeeper:

1. Can they explain the difference between ACV and RCV and show you where each is tracked in QBO?
2. Can they show you a supplement tracking log updated within the last 30 days?
3. Can they produce a job-level P&L for any closed job in the last quarter in under 15 minutes?

If the answer to any of these is no, your books are producing incomplete financial intelligence — regardless of whether the ledger balances.

Key Takeaways

• Restoration bookkeeping is a distinct specialty — not harder general bookkeeping, but a different set of workflows entirely.
• The chart of accounts is the foundation. Split income by service line, put TPA fees in direct costs, separate equipment revenue from labor revenue.
• Job costing requires one QBO record per job — Project or sub-customer — with every transaction coded to the specific job.
• Insurance AR has three stages: ACV, RCV holdback, and supplement. Each must be tracked and aged separately.
• Supplement tracking is worth $15,000–$50,000/year for most $1M–$3M restoration companies. Without a tracking log and monthly reconciliation, it disappears.
• TPA fees belong in cost of revenue. Posting them to operating expenses overstates gross margin and makes TPA channels appear more profitable than they are.
• Labor must be charged at the loaded rate (130–155% of base wage) for job costing to reflect true job cost.
• Equipment revenue must be reconciled against equipment logs before job close. Gaps of 15–25% are common without this habit.
• Close the books by the 15th. A 30–45 day close means running the business on stale data.
• The four essential reports: Job-Level P&L, Service-Line P&L, TPA Program AR Aging, Cash Flow Actual vs. Forecast.
• Most companies above $700K should outsource to a restoration specialist — cheaper and more accurate than general in-house bookkeeping.
• Run the three-question test on your current bookkeeper before assuming your books are correct.

Frequently Asked Questions

What is restoration bookkeeping and how is it different from regular bookkeeping?

Restoration bookkeeping is the specialized practice of maintaining financial records for insurance restoration contractors. It differs from general bookkeeping because revenue flows through insurance carriers in multiple tranches (ACV, holdback, supplements), TPA program fees must be treated as direct costs rather than operating expenses, equipment is billed by the day and must be reconciled against job logs, and every job requires a separate P&L. General bookkeepers lack the domain-specific workflows for these mechanics.

What chart of accounts does a restoration company need?

A restoration COA needs income accounts split by service line (water, fire, mold, contents, rebuild) and revenue type (labor, materials, equipment, O&P); direct cost accounts for labor (at loaded rate), materials, subcontractors, equipment, and TPA program fees; and standard operating expense accounts. The implementation uses either QBO Classes (recommended for most companies) or account-level separation (better for large operations).

How should a restoration company track insurance receivables?

Insurance AR should be tracked in three distinct stages: ACV receivable (post when scope is approved), RCV holdback (post when completion documentation is submitted), and supplement receivable (post only when carrier approves). Each stage has different payment timelines (ACV 30–45 days, holdback 45–90 days, supplements 30–60 days post-approval) and should be aged separately.

How do you account for supplement revenue in QuickBooks?

Post a QBO invoice for supplement revenue the day the carrier approves the supplement — not when submitted, not when collected. Maintain a supplement tracking log with submitted amount, approval status, approved amount, and collection status. Reconcile the log against AR monthly.

How should TPA referral fees be handled in the books?

TPA referral fees must be coded as cost of revenue — under a direct cost account named "TPA Program Fees." Never post them to operating expenses. Create a sub-account per program for program-level cost visibility.

What is the difference between ACV and RCV in bookkeeping?

ACV (Actual Cash Value) is the replacement cost minus depreciation — the initial carrier payment. RCV (Replacement Cost Value) is the full undepreciated repair cost. The difference is the holdback. Post separate AR invoices for ACV (at scope approval) and holdback (at completion documentation). The holdback is real receivable — don't ignore it.

Should restoration bookkeeping be cash basis or accrual basis?

Accrual basis above $1M, always. Cash basis understates receivables and makes the multi-stage insurance payment cycle impossible to track accurately. Banks and sophisticated buyers require accrual financials.

What does the monthly close process look like?

A 12-step process: bank reconciliation, credit card reconciliation, AP posting, AR payment application, equipment-day reconciliation, supplement log reconciliation, TPA fee coding review, job-level P&L review, service-line P&L review, TPA AR aging, cash flow review, owner package delivery. Must complete by the 15th of the following month.

What are the most common bookkeeping mistakes restoration companies make?

The seven most common: TPA fees in operating expenses, no job-level P&L, ACV and RCV treated as one, supplement revenue recognized before approval, raw wages used instead of loaded rates, equipment revenue not tracked, and monthly close occurring 30–45 days late. Each produces books that balance but report wrong margins.

When should a restoration company hire a bookkeeper vs. outsource?

Above $700K: outsource to a restoration specialist — cheaper ($12,000–$24,000/year flat for bookkeeping with job costing) and more accurate than in-house ($52,000–$82,000/year). $300K–$700K: depends on complexity. Under $300K: manage yourself with a proper QBO setup from a specialist.

Sources and Further Reading

• Restoration Industry Association (RIA), Cost of Doing Business Report, 2024
• National Council on Compensation Insurance (NCCI), Workers Compensation Classification Rates, 2024
• IBISWorld, Damage Restoration Services Industry Report, 2024
• Xactimate Regional Pricing Data, 2024

Cat3 Books Field Notes — Related Guides:

• What 'Restoration Bookkeeping' Actually Means
• The Four Cost Categories Every Restoration Job P&L Must Split
• Class Tracking for Restoration Jobs in QuickBooks Online
• Why Your Supplements Disappear Between Xactimate and QuickBooks
• Equipment-Day Reconciliation: The 15-Minute Weekly Habit
• Building a 13-Week Cash Forecast for Restoration
• Should You Outsource Your Restoration Company's Bookkeeping?
• The Complete Guide to Job Costing for Restoration
• The Complete Guide to Insurance Billing Accounting
• The Complete Guide to Restoration Company Financial Management

Last updated May 2026. Cat3 Books is a restoration-exclusive bookkeeping firm serving water, fire, mold, and reconstruction companies nationwide. All benchmarks reflect current client data and industry reports unless otherwise cited.