Insurance billing in restoration involves three distinct receivable streams — ACV (initial carrier payment, minus depreciation), RCV holdback (depreciation released at completion), and supplements (additional approved scope) — each with a different payment timeline and different accounting treatment.
The most common billing error is treating all three as a single receivable. When ACV, holdback, and supplement payments all post against one invoice, AR aging becomes meaningless — you can't tell what's overdue from what's timing-normal.
The Insurance AR Lifecycle described in this guide defines six named stages with specific collection actions at each stage. Companies that manage billing against this framework collect 85–92% of approved supplements vs. 65–75% without it.
By Cat3 Books · Restoration Bookkeeping Specialists. Updated May 2026.
Introduction
This guide is the definitive reference for insurance billing accounting in the restoration industry. It covers everything from the initial scope approval through final collection — including the accounting treatment for every payment type a restoration contractor encounters.
Who this is for: Restoration company owners, controllers, and bookkeepers managing insurance-driven work. Assumes QuickBooks Online (QBO) as the accounting platform.
What makes this different from a general AR guide: Insurance restoration billing involves a legally and contractually structured payment system that doesn't exist in most industries. The payment amounts, timing, and conditions for each payment type are determined by the insurance policy — not a standard net-30 invoice.
Based on: Standard insurance industry payment practices, IICRC documentation standards, and the billing mechanics of the eight major TPA programs active in the U.S. restoration market.
The U.S. homeowners insurance industry processes 5.5–7.5 million claims per year, generating the vast majority of insurance restoration revenue. Insurance Information Institute, 2024 Understanding how that claims payment system maps to your books is the difference between knowing what you're owed and finding out years later.
The Insurance Billing Lifecycle
The insurance billing lifecycle in restoration runs from initial claim assignment through final collection — typically 90–180 days for a job with a supplement. It involves at least three separate billing events (ACV, holdback, supplement) and multiple different parties (carrier, TPA, insured, mortgage company) who all play a role in payment timing and amount.
Stage-by-Stage Overview
Stage 1: Claim Assignment The insured files a claim. The carrier assigns it to an adjuster (staff adjuster or independent adjuster) or routes it through a TPA program. If TPA-routed, the TPA assigns the job to you from their contractor network. The job exists; no billing has occurred yet.
Stage 2: Scope Estimation You perform the inspection and produce an Xactimate estimate. For TPA-routed jobs, the scope is produced under the carrier's pricing guidelines (Xactimate ESX format). For direct carrier jobs, same process. The adjuster reviews and approves (with possible negotiation). Once approved, billing begins.
Stage 3: ACV Invoice Post an invoice in QBO for the ACV amount — the approved scope minus depreciation. This is the first billing event. ACV payment arrives in 30–45 days for most carriers. For TPA-routed jobs, the TPA may pay faster (some TPA programs pay within 15–20 days of scope approval) or may require a completion report before releasing ACV.
Stage 4: Work Completion and Holdback Invoice Work is completed. You submit a completion certificate, final invoices, photos, and any drying logs to the carrier or TPA. Post a second invoice for the RCV holdback amount. Holdback payment arrives in 45–90 days after documentation submission for most carriers.
Stage 5: Supplement Submission and Invoice If additional scope is identified during work (hidden damage, code upgrades), submit a supplement. If approved, post a third invoice for the supplement amount. Supplement payment arrives in 30–60 days of approval.
Stage 6: Final Collection and Job Close All invoices collected, final payments applied, job closed in QBO. AR balance for the job is zero.
The Xactimate Workflow in Accounting
Xactimate is the estimating platform used by most carriers to price restoration scopes. The approved Xactimate amount becomes the revenue ceiling for each job. Your accounting system must translate Xactimate line items into QBO accounts — a step most bookkeepers skip, creating a revenue and cost tracking gap.
Xactimate (owned by Verisk Analytics) is used for pricing by approximately 80% of U.S. property and casualty carriers. Verisk Analytics, 2024 Understanding how an Xactimate estimate maps to your books is essential.
Xactimate's Revenue Categories
A standard Xactimate estimate includes:
| Category | What it covers | QBO mapping | |---|---|---| | Labor | Time to perform each task (pricing = labor hours × trade rates) | Revenue — Labor (by service line) | | Materials | Material quantities × unit prices | Revenue — Materials (by service line) | | Equipment | Per-day rates for restoration equipment | Revenue — Equipment | | Overhead & Profit (O&P) | 10% overhead + 10% profit markup on labor and materials | Revenue — O&P | | General Conditions | Job-site costs (protection, temporary utilities, etc.) | Revenue — General Conditions |
When you invoice the carrier for an approved scope, your QBO invoice should break these categories into separate line items using your configured Items. This creates clean revenue tracking and enables accurate Xactimate-to-actual reconciliation.
Common Xactimate-to-QBO Mapping Errors
Error 1: Single-line invoices. The entire approved scope amount goes on one QBO invoice line. You can see the total but can't track revenue by category. Fix: use separate invoice line items for labor, materials, equipment, and O&P.
Error 2: Not splitting by service line. All revenue — regardless of whether it's water mitigation, fire, or mold — posts to a single "Revenue" account. Fix: use service-line-specific accounts or QBO Classes.
Error 3: Equipment revenue in "Other Revenue." Equipment billing from Xactimate is miscoded to a general revenue account instead of a dedicated Equipment Revenue account. Fix: create an Equipment Revenue account and map all Xactimate equipment line items to it.
Error 4: O&P not tracked. The 10/10 O&P markup is often omitted from the invoice or posted with no account mapping. Fix: create an O&P Revenue account and explicitly include O&P in every applicable invoice.
ACV vs. RCV vs. Depreciation Holdback Accounting
ACV is the amount the carrier pays first — replacement cost minus depreciation. The holdback is the depreciation amount released upon completion. Each requires a separate invoice in QBO posted at a different point in the job lifecycle. Combining them into one invoice obscures AR aging and makes it impossible to know which stage of payment is outstanding.
Actual Cash Value is calculated as Replacement Cost Value (RCV) minus depreciation for the damaged items or materials. For a roof with 15 years of useful life and a 30-year expected lifespan, 50% depreciation is applied. A $40,000 roof replacement would have a $20,000 ACV and a $20,000 RCV holdback. The ACV is paid immediately upon claim approval; the holdback is paid after completion documentation is submitted.
See also: RCV, Holdback, Depreciation
Replacement Cost Value is the total cost to repair or replace the damaged property with new materials of like kind and quality, with no deduction for depreciation. RCV coverage is a policy endorsement — not all policies have it. When a policy has RCV coverage, the carrier holds the depreciation amount (the 'holdback') until the insured actually makes the repairs and submits documentation. Without RCV coverage, the carrier pays only ACV and the holdback is not recoverable.
The holdback (recoverable depreciation) is the difference between ACV and RCV. It's withheld by the carrier as an incentive to actually complete repairs — the insured receives the depreciation only after proving the work was done. For the restoration contractor, the holdback is a real receivable that arrives 45–90 days after completion documentation is submitted. It should be tracked as a separate invoice in QBO, not bundled with the ACV invoice.
The Three-Invoice Model
For a $60,000 Xactimate scope with $10,000 depreciation:
| Invoice | Amount | Post when | Collect when | |---|---|---|---| | Invoice 1 — ACV | $50,000 | Scope approved | ~30–45 days after approval | | Invoice 2 — RCV Holdback | $10,000 | Completion docs submitted | ~45–90 days after submission | | Invoice 3 — Supplement | $8,500 | Carrier approves supplement | ~30–60 days after approval | | Total | $68,500 | — | 90–180 days total |
Depreciation Schedule Considerations
Some carriers apply depreciation by line item across the entire estimate, while others apply a single blended rate. For accounting purposes, the total holdback amount is what matters — not how it was calculated. Request the depreciation worksheet from the adjuster if the holdback calculation is unclear.
ACV policies (non-RCV): When the insured doesn't have RCV coverage, the carrier pays only ACV and the holdback is not recoverable. In this case, recognize revenue at the ACV amount only and write off the depreciation as an agreed scope reduction. This is common on older properties and commercial policies with higher deductibles.
The Supplement Tracking System
Supplements require a parallel tracking system outside of QBO — a log that records every supplement submitted, its current status, approved amount, and collection status. Companies with this system collect 85–92% of approved supplements; without it, collection rates fall to 65–75%. The difference for a $2M restoration company is $30,000–$60,000 per year.
Why a Separate Log Is Necessary
QBO is your accounting system — it records approved, invoiced, and collected amounts. But supplements live in a different state before approval: they're submitted but not yet revenue. You need to track that state somewhere, and QBO isn't designed for it.
The supplement log lives in your job management platform (Albi, Dash, JobNimbus), a CRM, or a spreadsheet. It captures pending supplements — revenue that exists as a business claim but not yet a financial fact.
Supplement Log Structure
| Field | Required | Purpose | |---|---|---| | Job ID | Yes | Links to QBO project | | Supplement number | Yes | Sequential, for reference | | Submitted date | Yes | Starts the response clock | | Submitted to | Yes | Adjuster name, carrier, TPA | | Submission type | Yes | Supplement, reinspection, escalation | | Submitted amount | Yes | Xactimate or written scope value | | Status | Yes | Pending / Approved / Partial / Denied / Appealed | | Carrier response date | Yes | When status changed | | Approved amount | If approved | Confirmed by carrier in writing | | Invoice date | If approved | Date posted to QBO | | Payment received date | If collected | Date payment applied in QBO | | Notes | Optional | Adjuster comments, negotiation notes |
Supplement Approval Rates by Type
| Supplement type | Typical approval rate | Notes | |---|---|---| | Hidden damage (additional scope) | 60–75% | Approval depends on documentation quality | | Code upgrades with permit documentation | 80–90% | Carrier is legally obligated under L&O coverage | | Equipment days beyond initial estimate | 70–85% | Requires drying log documentation | | O&P on subcontractor work | 55–70% | Negotiation required with some carriers | | Materials price escalation | 45–65% | Requires current material cost documentation |
The Supplement Workflow
- Identify the supplement opportunity during work or at job close
- Prepare the Xactimate supplement — use the correct version of Xactimate, apply regional pricing, include documentation
- Submit to adjuster or TPA — track in supplement log as "Pending"
- Follow up at 30 days if no response — contact adjuster or TPA contractor relations
- Receive approval — update log, post QBO invoice same day
- Apply payment — update log, close supplement record
- If denied — escalate to supervisor or file appraisal demand if warranted; update log to "Denied/Appealed"
Find Your Hidden Supplement Revenue
We audit the supplement tracking process in every new engagement. The average approved-but-uncollected supplement backlog we find is $38,000–$54,000. We can tell you where yours stands in 30 minutes.
Two-Party Checks and Mortgage Company Holds
Two-party checks require the property owner's endorsement before deposit — a logistical challenge with no accounting complexity. Mortgage holds require draw requests as work progresses — the receivable is real, but collection is staged. Both are managed through the same AR invoicing structure; the difference is the endorsement or draw process before you can deposit.
Two-Party Check Handling
A two-party check names both the property owner and the contractor (e.g., "Pay to the order of ABC Restoration and John Smith"). Before you can deposit it, John Smith must endorse the back of the check.
Endorsement workflow:
- Receive the check — note it in your AR tracking with "Pending Endorsement" status
- Contact the property owner immediately — explain the endorsement requirement and the timeline
- Arrange endorsement — in-person at your office, via mail (use certified mail for checks over $5,000), or via a mobile notary for large commercial checks
- Deposit after endorsement — apply to the corresponding AR invoice in QBO
The 30-day rule: If you haven't received an endorsed two-party check within 30 days of the carrier issuing it, escalate. Common causes: property owner hasn't received the check (carrier mailed it to wrong address), property owner is holding it (waiting to see more of the work), or property owner is using the check as leverage (deductible dispute, quality concern). Address the underlying issue — don't let it age in your AR as a note.
The accounting is unchanged. A two-party check for $42,000 is applied to the $42,000 ACV invoice exactly like any other payment.
Mortgage Company Holds (Escrow Draws)
When a mortgaged property has significant insurance damage, the lender typically requires that insurance proceeds be controlled through escrow and released as repairs are verified.
The draw process:
- Initial draw: typically 33–50% of the insurance proceeds upon scope approval and start of work
- Progress draws: 25–33% after documented milestone completion (e.g., demolition complete, framing complete)
- Final draw: remaining balance after final inspection and completion documentation
Accounting for escrow draws:
Post the full AR invoice for the ACV amount when the scope is approved. As each draw is released and deposited, apply a partial payment to the open invoice. The invoice remains open (partially applied) until the final draw is collected and the invoice is fully paid.
Flag: If a final draw is outstanding for more than 60 days after submission of completion documentation, contact the lender directly. Escrow release requires an active follow-up process — it doesn't happen automatically.
TPA Referral Fee Treatment
TPA program fees are a direct cost of revenue, not an operating expense. They must be allocated to the specific jobs they cover and coded to a Cost of Revenue account. The major TPA programs in restoration — Contractor Connection, Alacrity, Code Blue, Sedgwick — use different fee structures; each needs to be tracked separately for program-level profitability analysis.
Fee Structures by Program Type
TPA programs use three different fee structures:
| Structure | How it works | Common programs | |---|---|---| | Flat percentage | X% of job revenue | Most common; Contractor Connection, Alacrity | | Tiered percentage | Lower % for higher job revenue | Some large national programs | | Per-claim fee | Fixed $ per job regardless of size | Less common; some regional TPAs | | Net settlement | Carrier pays TPA; TPA pays contractor net of fee | Code Blue and others |
Net settlement billing is the most common source of TPA fee accounting errors. When the TPA pays you net of the fee (i.e., you receive $9,000 on a $10,000 job and the TPA retains $1,000), the temptation is to post $9,000 as revenue and $0 as TPA expense.
This is wrong. The correct treatment:
- Post $10,000 as revenue (gross amount approved)
- Post $1,000 as TPA Program Fee expense (direct cost of revenue)
- Apply $9,000 cash receipt to the $10,000 AR invoice as partial payment
- Post the $1,000 TPA fee as a separate credit against the AR invoice
This approach preserves the true gross revenue figure and shows the TPA fee as the cost it is.
TPA Fee Rate Reference
| TPA Program | Typical fee range | Billing method | Notes | |---|---|---|---| | Contractor Connection | 5–10% | Net settlement | Deducted from payment | | Alacrity Services | 5–10% | Monthly invoice | Some market variation | | Code Blue | 8–12% | Net settlement | Higher administrative requirements | | Sedgwick | 7–11% | Monthly invoice | Large commercial accounts | | Crawford Contractor Connection | 6–10% | Varies | Depends on program tier | | Worley Claims Services | 5–9% | Monthly invoice | CAT-heavy program | | Gallagher Bassett | 6–10% | Monthly invoice | Commercial-focused |
Note: Fee rates are subject to change and vary by program tier, geographic market, and contractor relationship. Confirm current rates with your TPA program administrator.
TPA program contracts and published rate schedules, 2024–2025The Insurance AR Lifecycle Framework
The Insurance AR Lifecycle is a six-stage framework for tracking every restoration job's receivable from scope submission through final collection. Each stage has a defined collection action. Managing AR against this framework — rather than just days outstanding — gives you a collection action list rather than just an aged balance.
Stage 1: Estimated
Definition: Scope has been submitted to the carrier or TPA. No approval yet.
AR status: No invoice in QBO. Revenue not yet recognized. Notional scope value tracked in job management system only.
Collection action: Follow up with adjuster within 7 business days if no response. For TPA-routed jobs, follow up with the TPA contractor portal.
Flag: Estimates outstanding over 14 days without an adjuster response.
Stage 2: Active
Definition: Scope is approved. Work is in progress. ACV invoice has been posted in QBO but is awaiting carrier payment.
AR status: ACV invoice open in QBO. Aged from the date of scope approval.
Collection action: For most carriers, ACV payment arrives within 30–45 days without follow-up. At 30 days, verify the carrier has the invoice and the correct mailing/payment address. At 45 days, contact the adjuster directly.
Flag: ACV invoice over 45 days outstanding without contact from the carrier.
Stage 3: Pending ACV
Definition: Work is complete. ACV invoice is submitted. Awaiting ACV payment.
AR status: ACV invoice aging in QBO. If holdback invoice has been posted, it ages separately.
Collection action: At 45 days: call the adjuster. At 60 days: escalate to carrier's claims supervisor. At 75 days: consider a formal demand letter and review your contract for payment terms.
Flag: ACV over 60 days post-invoice submission.
Stage 4: ACV Received
Definition: ACV payment collected. Holdback and any supplements still outstanding.
AR status: ACV invoice is closed (payment applied). Holdback invoice is open. Supplement invoice is open if supplement has been approved.
Collection action: Confirm completion documentation was received by the carrier. At 45 days post-submission: follow up on holdback release. For supplements, track separately in the supplement log.
Flag: Holdback over 60 days post-completion documentation submission.
Stage 5: Supplement Pending
Definition: Supplement has been submitted or approved. Payment is outstanding.
AR status: Supplement invoice open in QBO (if approved) or tracked only in supplement log (if pending). Holdback may still be open as well.
Collection action: For approved supplement invoices: standard AR follow-up at 30 days. For pending supplements (not yet approved): follow up with adjuster at 21 days. At 45 days without response: escalate to carrier supervisor or request re-inspection.
Flag: Supplement submitted over 30 days without status update.
Stage 6: Final
Definition: All invoices — ACV, holdback, supplements — are paid and applied. Job is closed.
AR status: All invoices closed. Zero open balance on the job.
Collection action: None — job is complete. File documentation (approval letters, payment records, drying logs) per your record-keeping policy.
Transition to Final: Close the job in your job management system and mark the QBO project complete. This triggers the job to appear in your closed-job P&L report.
AR Aging by Job Stage
Standard AR aging (0–30, 31–60, 61–90, 90+ days) is insufficient for restoration. You need AR aging that segments by payment stage (ACV, holdback, supplement) and by TPA program. This segmentation tells you what action each outstanding balance requires — which is more useful than just knowing how old it is.
The Four-Dimension AR Report
An effective restoration AR aging report has four dimensions:
- Age buckets (0–30, 31–60, 61–90, 90+ days)
- Payment stage (ACV, holdback, supplement)
- TPA program (direct, CC, Alacrity, Code Blue, etc.)
- Collection status (normal, follow-up needed, escalated, disputed)
In QBO, you can approximate this using custom fields on Projects and filtered AR reports. A full four-dimension report may require exporting to Excel or using a separate collections management tool.
Using Aging to Drive Collection Actions
| Stage + Age combination | Action | |---|---| | ACV, 31–45 days | Verify invoice received by carrier — no action yet | | ACV, 45–60 days | Call adjuster, confirm payment in process | | ACV, 60–75 days | Escalate to carrier supervisor | | ACV, 75+ days | Formal demand; review for lien filing (if applicable) | | Holdback, 0–45 days post-submission | Normal — within expected range | | Holdback, 45–75 days post-submission | Follow up on completion documentation receipt | | Holdback, 75+ days post-submission | Escalate; confirm documentation was received | | Supplement (approved), 31–60 days | Normal collection follow-up | | Supplement (approved), 60+ days | Escalate to carrier | | Supplement (pending), 21–30 days | Follow up with adjuster | | Supplement (pending), 30–45 days | Escalate; consider re-inspection request |
Write-Offs and Partial Approvals
Write-offs in restoration occur when a carrier denies a scope item after all appeals are exhausted, or when an insured doesn't pay their deductible. The proper treatment is a credit memo against the open invoice, posting the write-off to Bad Debt Expense. Partial approvals — where the carrier approves less than the submitted amount — require an adjustment to the invoice and a decision about whether to appeal the gap.
Handling Denied Scope Items
When a carrier denies a specific scope item:
- Evaluate the denial. Is it a documentation issue (can be corrected with better documentation), a policy issue (coverage genuinely doesn't apply), or an adjuster error (grounds for appeal)?
- Appeal if appropriate. First appeal to the same adjuster with better documentation. Second appeal to the claims supervisor. Third option: invoke the appraisal clause in the policy if the dispute is significant.
- If final: Obtain written denial. In QBO, create a credit memo for the denied amount, posting to "Bad Debt — Carrier Denial." Apply the credit memo to the open invoice. Update the supplement log with "Denied — Final."
Do not write off claims that haven't been formally denied in writing. Unapproved scopes that haven't received a written response are not denials — they're pending. Track them in the supplement log, not as write-offs.
Partial Approvals
A partial approval occurs when the carrier approves a portion of the submitted scope or supplement. For example: you submit a $12,000 supplement; the carrier approves $8,500.
Workflow:
- Adjust the supplement invoice in QBO from $12,000 to $8,500
- Note the partial approval and the reason in the supplement log
- Evaluate whether the $3,500 gap is worth appealing
- If appealing: track as "Partial — Appeal Pending" in the supplement log
- If accepting: close the supplement record at $8,500
Aggregate tracking: If you're consistently receiving partial approvals on a specific type of supplement (e.g., O&P on subcontractor work), that's a pattern worth analyzing. It may indicate a specific carrier's policy position that you need to address in estimating.
Public Adjuster Fees
Public adjusters (PAs) are hired by the insured to advocate for a higher claim settlement, charging 10–15% of the claim value. Their fee comes from the insurance proceeds — not from you. When a PA is involved, the accounting remains unchanged: recognize revenue at the approved scope value, not the net-of-PA-fee amount. The insured receives less cash from the settlement; their PA obligation is their expense, not yours.
How PA Involvement Affects Collections
When a public adjuster is involved:
- The PA negotiates the claim settlement on behalf of the insured
- PA fees run 10–15% of the settlement amount (state-regulated, varies by state)
- The carrier pays the settlement to the insured (often as a two-party check to insured + contractor)
- The PA's fee is paid from those proceeds before the contractor is paid
Example:
- Approved scope: $60,000 ACV
- PA fee at 12%: $7,200 (paid by the insured to the PA)
- Net to insured: $52,800
- Insured pays contractor: $52,800 (if the contractor charges back the full $60,000 minus deductible, the insured must bridge the gap from their own funds or negotiate with the PA)
The accounting treatment for you: Post an AR invoice for $60,000 (the approved scope). Apply payments as received. If the insured can only pay $52,800 because of the PA fee, the $7,200 gap becomes a collections issue — not an accounting write-off. The PA fee doesn't change your approved scope; it changes the insured's available cash to pay their deductible or bridge gap payments.
Code Upgrades and Law & Ordinance
Law & Ordinance (L&O) coverage pays for code upgrades required when repairing damage. It's a separate endorsement on the property policy, billed as a separate supplement line item. The accounting is a standard supplement — post a separate invoice for approved L&O scope. The common error is including L&O amounts in the base scope invoice, which obscures the coverage type for documentation purposes.
Law & Ordinance (L&O) coverage is a policy endorsement that covers the additional cost of bringing a structure into compliance with current building codes during a covered repair. For example, if a 1970s structure requires electrical panel upgrades, insulation to current R-values, or HVAC replacement as part of a fire repair, the base policy covers the replacement in kind (same as before the damage), while L&O coverage pays the upgrade cost above that. Not all policies include L&O; it's more common in older structures and must be explicitly endorsed. Bill L&O scope on a separate invoice or supplement — do not bundle with base scope.
See also: RCV, Supplement
When to Identify L&O Scope
Common L&O trigger items:
- Electrical panel upgrade (many pre-1990 homes need panel replacement when significant electrical work is touched)
- Insulation upgrade to current energy code requirements
- Window replacement to current egress size requirements
- GFCI outlet requirements in kitchens, bathrooms, garages
- Smoke and CO detector upgrades per current code
- Structural requirements that changed since original construction
Documentation requirement: Most carriers require a permit (or permit requirement documentation from the local building department) to approve L&O scope. Pull the permit before or at the same time as submitting the L&O supplement.
The billing structure: Create a separate Xactimate supplement file (or supplement section) specifically labeled "Law & Ordinance" or "Code Upgrade." Submit it referencing the L&O endorsement on the policy. Post a separate QBO invoice when approved — labeled "Law & Ordinance Supplement" — distinct from the base scope invoice.
Revenue Recognition Timing
Restoration contractors should use accrual-basis revenue recognition: recognize ACV revenue when carrier approves the scope, holdback when completion documentation is submitted, supplements when approved by the carrier. Under the formal accounting standards, the two most common methods are Completed Contract and Percentage of Completion. Most $500K–$5M companies use Completed Contract for simplicity.
The Two Methods
Completed Contract Method Recognize all revenue on a job when the job is complete — scope is finished, documentation is submitted, final invoices are posted. All costs are held in WIP (Work in Progress) until completion.
- Best for: Jobs with short durations (under 60 days). Most mitigation jobs.
- Limitation: In high-revenue months with lots of job completions, income is lumpy. In low-completion months, income may be understated.
Percentage of Completion Method Recognize revenue proportionally as work is performed. If 40% of the scope is complete, recognize 40% of the revenue.
- Best for: Long-duration jobs (90+ days). Reconstruction and large commercial projects.
- Limitation: More complex — requires estimating % completion for each job at each close.
For most restoration companies, Completed Contract is the right choice for mitigation (3–21 day jobs) and a blend of both is appropriate if you also do significant reconstruction work with 90+ day timelines.
The Practical Approach
For a restoration company using Completed Contract:
-
ACV revenue: Post the invoice when scope is approved, but mark the revenue account appropriately if the work hasn't started. In practice, for most mitigation jobs (fast start, fast completion), posting ACV at approval and recognizing it when work completes within the same accounting period is a reasonable simplification.
-
RCV holdback: Post when completion documentation is submitted. The revenue is earned when the work is done and documented — not when the check arrives.
-
Supplement: Post when approved. The revenue is earned when the carrier approves additional scope — not when the work is done, not when the check arrives.
Tax implications: Your tax accountant may use a different recognition approach for tax compliance (cash basis is permitted for small businesses under certain IRS thresholds). Coordinate with your CPA to ensure your bookkeeping basis aligns with your tax reporting basis, or maintain separate schedules if they differ.
Key Takeaways
- Insurance billing has three distinct AR streams — ACV, holdback, and supplements — each with different payment timelines and accounting triggers.
- Post three separate invoices per job: ACV at scope approval, holdback at completion documentation submission, supplement at carrier approval.
- Never recognize supplement revenue on submission — only on approval. Maintains accurate AR and complies with accrual accounting.
- TPA fees are cost of revenue, not operating expenses. Net-settlement TPAs must be grossed up in accounting — post gross revenue and separate TPA fee.
- Two-party checks require endorsement — build a 30-day endorsement follow-up rule into your collections workflow.
- Mortgage company escrows require draw requests — apply partial payments to open AR invoices as draws are released.
- The Insurance AR Lifecycle has six stages, each with a specific collection action. Stage-based AR management is more actionable than calendar-only aging.
- Write off only confirmed denials — with written documentation. Pending supplements are not write-offs.
- Law & Ordinance scope should be on a separate invoice/supplement, not bundled with base scope, and requires permit documentation for approval.
- Accrual-basis accounting is essential. Cash basis makes it impossible to track the multi-stage insurance payment cycle accurately.
- Revenue recognition: Completed Contract is simplest and appropriate for most mitigation work. Percentage of Completion is better for 90+ day reconstruction.
- Systematic supplement tracking (log + monthly reconciliation) increases supplement collection rates from 65–75% to 85–92%.
Frequently Asked Questions
How do you account for insurance receivables in a restoration company?
Track AR in three stages: ACV receivable (invoice at scope approval), RCV holdback (invoice at completion documentation submission), supplement receivable (invoice at carrier approval). Age each stage separately. This gives you a collection action list rather than just an aged balance.
What is ACV vs. RCV in restoration billing?
ACV is replacement cost minus depreciation — the initial carrier payment. RCV is the full replacement cost. The difference is the holdback, released after completion documentation is submitted. A $60K scope with $10K depreciation has a $50K ACV and a $10K holdback — two separate invoices in QBO.
When do you recognize revenue on a restoration job?
Accrual basis: ACV at scope approval, holdback at completion documentation submission, supplements at carrier approval. Cash basis (not recommended above $1M): only when checks are deposited. Completed Contract method: all revenue recognized when the job is complete.
How do you handle two-party checks?
Require endorsement before deposit. Contact the property owner immediately when the check arrives. Build a 30-day follow-up rule into your AR workflow for unendorsed checks. Accounting treatment is identical to single-party checks.
How should TPA fees be recorded?
As a direct cost (cost of revenue), not an operating expense. For net-settlement TPAs, post gross revenue and the TPA fee as a separate cost — never net them.
What is the Insurance AR Lifecycle?
Six stages: Estimated (not approved), Active (work in progress, ACV invoiced), Pending ACV (work complete, ACV outstanding), ACV Received (holdback still open), Supplement Pending (supplement invoiced or tracking), Final (all collected, closed). Each stage has specific collection actions.
Sources and Further Reading
Primary Sources:- Insurance Information Institute, Property Claims Frequency and Severity Data, 2024
- Verisk Analytics, Xactimate Market Adoption Statistics, 2024
- IICRC, S500 Standard for Professional Water Damage Restoration, 2021
- IICRC, S520 Standard for Professional Mold Remediation, 2015
- TPA program contracts and published rate schedules, 2024–2025
Cat3 Books Field Notes — Related Guides:
- Why Your Supplements Disappear Between Xactimate and QuickBooks
- The Code Blue Test: How to Decide Which TPA Programs to Drop
- Xactimate vs. Symbility: Which Estimating Platform Maps Cleanly Into Your Books?
- The Complete Guide to Bookkeeping for Restoration Companies
- The Complete Guide to Job Costing for Restoration
- 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.