How Do You Keep The Cash Flow Going?

This was the question I posted on the RIA forum on LinkedIn. This particular forum is populated with contractors that are working in the restoration industry. They are all primarily owners of restoration companies, sub-contractors and suppliers.

There were many great insights and suggestions to remain solvent, especially during the heavy crunch times. Here is the list of tips I distilled from the discussion.

1. Always have a line of credit available. If you can't get a line of credit, have 10% of your annual gross income as cash in the bank. If you can't do that, life may be hard at times.

2. Acquire the line of credit in advance of emergency needs. Once the heavy freezes happen or the tornado strikes, you don't have time to get a line of credit. It may also take a month or more to gather all the documentation, gain the approvals and set up a line of credit.

3. Make the conscious choice, in advance, to not extend credit to clients. It's like loaning money to family, don't do it unless you expect to not be paid back. There are many good people that will commit to a schedule and pay you back in full. The problem you face is, usually you are not set up to offer credit, charge interest, and follow up on collections. Also, once the emergency is past, the insurance adjuster and the owner lose their urgency to act now and make you happy.

4. Bill mitigation costs separately and invoice immediately. Progressive billing is the easiest way to avoid long payment wait times. Lien holders and mortgage companies do not have claim on any mitigation costs so they are left off the check. This enables you to get paid much faster with less effort on your part.

5. Once the building is stable, take the time to: 
        A. Complete repair estimates. Now that the building is stable, you can more clearly see what should be done and write an accurate estimate. Always include a comment to allow for supplementals that may not be included in your estimate. 

        B. Agree on a price with the payee. With an accurate estimate in hand, you can arrive at an agreed upon price with the adjuster or owner. Without a concrete price, everyone is uneasy with the situation. In some States, it is actually illegal to sign a contract without a price and a completion date included.

        C. Sign a contract. Until you sign a contract, you are dependent on the integrity of the owner for payment. Even if the insurance company pays the owner, you may not get paid if there is not a signed contract in place with the owner.

        D. Collect mitigation fees. You should always insist on the mitigation payment before any work begins on the repairs. Again, once the work is done, urgency and oral commitments seem to dissipate in the wind.

        E. Collect a deposit for the repairs before starting the restoration. Just as with payment for mitigation work, you should also get a deposit before you start the repairs. There are smaller jobs where this seems impractical, but 10 - $5,000 jobs quickly equal $50,000 in receivables that you may not be equipment to float.

6. Partner with companies that insure receivables and guarantee payments. There are some companies that will buy your receivables. Once the work is done, they collect the amounts owed. These companies are actually credit companies and have the machinery in place to collect money, something the typical restoration contractor doesn't have.

7. Offer instant credit card services for owners to pay deductible or emergency services on the spot. There some credit card companies that will do on-the-spot approvals. Many retail outlets use them for Lasik surgery, cosmetic surgery, expensive sewing machine and other equipment sales, etc. It is literally a phone call and 5 questions, then approval is issued on the spot. The credit limits range from a few hundred dollars to several thousand. Synchrony is one institution that offers these types of cards.

8. Possibly consider "program work" as shorter, guaranteed payment schedules often offset the lower prices paid and keep the cash flow going. Many start-up restoration companies can benefit from "program work" offered by large insurance companies. There are trade offs, but generally you have guaranteed payments on a shorter schedule. These programs are rife with regulations, monitoring and paperwork, but can help keep you solvent.

9. Lower your overhead costs by purchasing the equipment that you use everyday and renting all other specialty or seldom used equipment and labor. Generally you can rent equipment 10 times for the cost to purchase it. If it is not in the field every week or two, sell it and rent. This lowers your storage costs, equipment purchase costs and maintenance costs. You can set up accounts with your local rental facilities like Sunbelt or Interlink. Many times these rental places will also maintain and service the equipment on site, which also lowers your labor costs.

10. Sub-contract work to pre-screened, pre-trained contractors. Using the same principle as in #9, keep only the staff you will use on a daily basis and sub out the other work. You should screen and train these subs so that they will do the same quality of work as an in-house crew. When the lean times come, you don't have to lay them off, they will just work for someone else until your work picks back up again. If you take good care of them, they will always want to come back and they will put your jobs ahead of others.

11. Maintain a constant presence with the payee regarding invoices due. Call regularly and/or email often. Be just persistent enough to not quite be irritating. This will keep your invoice constantly moving up to the top of their piles. 

12. Provide incentives to pay quickly; discounts, interest, start of work, etc. It is easier to give a discount of 5% if the bill is paid within 10 days than spend weeks or months on the phone trying to collect. For many, 5% may seem like a lot, but look at the numbers. 

On a $50,000 job, 5% is $2500. If you spent 3 hrs/week for 16 weeks (4 months) trying to collect, you spent 48 hours. If your time is worth $50/hr, then you have lost another $2400, 48 hours x $50 = $2400. But, if the $47,500 came in without you have to spend any extra time collecting, you could use that 48 hours to generate additional work, and realize thousands of dollars in extra income, far more than you sacrificed. 

13. Never return contents or property to the owner without payment first. Once you have relinquished control of the property, you have lost all leverage you possessed. Let it be known from the onset, that nothing will be returned until it is paid for in full. All moving and storage companies will not release the property until it is paid in full. You may also need a clause that states, "Any property not paid and claimed within 30 days will be sold." The storage unit companies do it all the time.

Now, go to and make your business grow.

Photos courtesy of:
http://englishwithatwist.com/2013/05/24/money-is-liquid-10-metaphors-about-money/
https://www.synchronybusiness.com/markets/home-improvement-financing.html

How Restoration Companies Document Jobs Without Really Trying

"David, Please look this case over and tell me what you think." The attorney handed me a folder, 1.5 inches thick, filled with Complaints, Disclosures, Responses to Interrogatories, Responses to Responses to Interrogatories, etc. 

I quickly scanned through the pages. It was a simple water loss that had gone south and the owner was suing because they thought the restoration company was responsible for the mold that was now in their house.

I found the estimate from the restoration company. It listed 48 fans days and 8 dehumidifier days. Did that mean there were 2 dehumidifiers for 4 days with 12 fans or since the owners claimed the fans seemed to run forever, was there only 1 dehumidifier for 8 days with 6 fans? Or did they start with 15 fans and remove some as areas dried? 

There was no mention on the cover page of when they were called out, what the source of the water was, or any other information relating to the loss. There were no drying logs or follow-up notes of any moisture testing.

The owner's claimed in the Complaint that they had the home tested for mold and there was a lot of mold, but they couldn't remember the name of the company and there was no mold report. The insurance company, owner, and restoration company all had different dates for the loss, which incidentally occurred over 3 years earlier. 

What a mess. I not sure I could  figure out what really happened, even with a divining rod!

Documentation typically is a nightmare for everyone. There are so many phone calls, abbreviated emails, texts, and face to face conversations and agreements that weeks or months later, the ice cream hits the fan as everyone tries to place blame for the problems. It really isn't that hard to leave a paper trail that will help unwind the tangled webs we do so often weave.

Following is a list of items or practices that Restoration Companies can use to help document jobs more thoroughly. These ideas work as well as you work them.

Contract & Authorization to Work -This is one of the most important documents you can produce. Without a signed contract guaranteeing payment and authorizing you to work on the property, you are left to the good graces of the owner or a judge to receive payment. In order to be valid and enforceable, contracts must contain certain elements.

1. The names of all parties involved.
2. The date the contract was signed by each party.
3. A description of the work to be performed or services to be rendered.
4. The total cost of the work or services to be performed.
5. If the total cost can not be determined upfront, a schedule of hourly rates or unit costs for equipment, personnel and services is a must.
6. The dates by which the work or services are to begin and end.
7. The dates or conditions when payments are due.
8. Means to be employed if conditions are not met, i.e.; work stoppage, interest charges, withholding payment, legal action, etc.

Information sheets - Every company should have an information sheet, along with their owner contract, that is filled out the day of the first contact. This form will be referred to constantly as the job progresses. We always insisted that our techs could not start the job until all the forms were filled out completely. The information sheet should include:

1. Owner or representative's name.
2. Address of the loss.
3. Additional addresses of the owner or representative.
4. Phone Numbers, the home number as well as all cell phones.
5. Insurance carrier or liable party.
6. Technicians, estimators or coordinators working the job with contact numbers.
7. Source or cause of the loss.
8. Other notes, including; items discussed or promised

Work Orders - If there is a written work order form that is given to the techs before they go to the job, several good things happen.

1.  The techs have all the contact information, including the address of the property, phone numbers, time of appointment, etc.
2.  The techs know what work is required, where to do it and what equipment or supplies are needed so they come prepared.
3.  Any additional work that needs to be done can be added to the work order.
4.  The owner can sign the work order upon completion, accepting the work.

Satisfaction Completion Forms -This is a simple form that the owners sign after the final walk-through accepting the work and guaranteeing payment. If you have a pile of completed work orders and a final Satisfaction Completion Form, each signed by the owner, you are well on your way to receiving payment for the work as well as protecting yourself against any disagreements.

The owner should receive a copy of all of these documents for their own file as well.


Call the Office - Most estimators and coordinators are so busy running here and there, answering phone calls, and putting out fires that there doesn't seem to be any time to write down work orders or any other documentation.

We actually wrote software that stored all our projects online. We could access it through our smart phones or computers from anywhere and enter notes directly to the project. These were available for everyone associated with the project to see. (There are other products on the market now that do much of what our software did.) It worked very well, but even then, I found it difficult to enter all the notes needed.

The solution was to "Call Tanya". As I drove to the next job, I would call the office and dictate to Tanya the notes we needed to record. She was always in the office and next to the computer.

The jobs with the least amount of documentation usually end up with the greatest propensity for legal liability. 

Sticky Notes - For a long time I carried a small spiral notebook in my pocket to record thoughts, ideas, assignments, etc. But then I found I would have so many new notes in one day, that the things I was supposed to do were hidden 5-6 pages back in the notebook. I also found that notes for different jobs were only in my notebook, notes for several jobs were all on one page or they were never in the job folder where I needed them months later. Then I discovered sticky notes.

The 2"x2" size became the hard copy of my brain. I would keep several pads in my car, on my desk and in my notebook. One thought or phone number per page. Then they were posted in the location best suited to be completed or saved; the dash of my Jeep, on the wall by my desk or at home by the phone. They all went into the appropriate job folder and months later I still had the phone number, address, or summation of a phone call.

In spite of technology and the Internet offering us text messaging, emails and other forms of communication, I still find sticky notes often the fastest way to initially preserve a thought, which I can then transfer easily to another medium when I have time.

Notes in the Cloud - There are many note-taking apps that are available for all the different I-Phones, Android Phones, Blackberries, I-Pads, tablets, etc. Most of these include the feature of storing the information on the Internet Cloud and then automatically syncing with multiple devices.

Many apps also enable you to verbally dictate notes that are then converted into text on the spot. This allows you to take quick notes on site or in a meeting and then when you return to your computer, you can flesh out the document, save it and then share it through texting, email, fax or other media.

I often take the notes of the meeting on my phone and send them to the other party at the conclusion of the meeting so we both have exactly the same notes and written agreements. They can be organized and printed out later to preserve a hard copy.

Photos and Videos - I used to always carry a camera with me and took boatloads for photos of each job. Now nearly everyone has a phone with good to excellent cameras. Taking photos is no longer hard and often they can be shared, even while you are on the phone, enhancing the communication experience.

It is a skill to learn what to photograph. I used to go back through the shots I had taken and the item I was looking for was always just outside the frame. Lots of practice will teach you what will likely be needed later. The more photos you take, the greater chance you have of documenting what you need.

The best way to photograph is the way movies are filmed. 

     First take a wide shot of each wall,
     Then take closer details of each shelf, 
     Then close-up shots of items of greater value or interest,
     Possibly both front and back.

Videos are also great for documenting larger areas, such as the exterior of a building, large rooms or piles of content. It is important to pan slowly and remain for at least 5 seconds on each area or item or you will become motion sick playing it back or have to continually pause the video.

Whatever method or methods you use to document your files, the better you do it, the less your chances are of ending up in court. Most of these ideas are simple and easy once you decide to develop the habit.  

Remember, the jobs with the least amount of documentation usually end up with the greatest propensity for legal liability.

How Owners Can Document Losses Without Really Trying

The older couple looked more worried now than they did when the tornado ripped the roof off their home. I had just presented them with the invoice for repairing and replacing their roof, it was nearly $12,000.00. I laughed and said, "You only have to pay your $250 deductible, the insurance has already paid the rest."

The husband stammered, "We haven't seen any checks from the insurance company."

"Are you sure? The adjuster told me he sent the checks."

"No, we haven't received any checks."

I grabbed my phone and called the adjuster. "Are you sure you sent the checks?"

"Yes," he stated. "They went out over 3 weeks ago. They should have them."

I suggessted to the owners that we look through all the correspondence they had from the insurance. They found opened letters on the counter, some envelopes on the top of the fridge and some other papers on the desk. Half of the envelopes had not been opened. We started with the unopened envelopes. In the second and third ones, we found a check in each. 

I asked why they hadn't opened these checks? The owner said he had stopped reading them because they didn't make any sense and he was tired of being confused. 

While insurance losses can be confusing, Owners have a responsibility to maintain proper records for losses. It not only helps you understand what is going on, but can make a world of difference later if you end up with legal issues. You should ask for copies of all documents you sign from both the insurance company and any contractors. Having in your file what they have in their file, prevents documents from changing.

Keep All Documents in One Place - During an insurance loss, owners are inundated with paperwork. In fact, the adage is really true, "He who has the most paper work usually wins." There will be contracts from everyone, estimates from everyone, satisfactory completion documents, change orders, insurance policies, letters from the adjuster, invoices, etc., and that is if the job goes well.

Create a file, a large envelope or a box that "everything" related to the job goes in. Keep it in the same place. This way the papers will go in and they will still be there when you need them.If there are legal proceedings, the mountain of paperwork will continue to rise. If you don't have a way to organize and retain it all in one place, you will lose critical documents and may lose your case.

I knew one family involved in a lawsuit against a large construction company, who received 20,000 pages of documentation from the opposing attorney. All of it needed to be read to determine if it was accurate.

Prepare for the worst,
Expect the best, and
Take whatever comes.

If you just follow the first phrase and only prepare for the worst, bad things will happen to you all the time. The Law of Attraction is real and we usually receive exactly what we expect.

I had a judge/attorney with a water loss who spent the first 45 minutes I was there telling me about all the lawsuits he had over his home. I innocently asked him, "Should I expect to be sued as well?" He was flustered, but assured me that it wouldn't happen. He was a challenging customer, but since I thoroughly documented everything that happened, we stayed out of Court.


Sticky Notes - For a long time I carried a small spiral notebook in my pocket to record thoughts, ideas, assignments, etc. But then I found I would have so many new notes in one day, that the things I was supposed to do were hidden 5-6 pages back in the notebook. I also found that notes for different jobs were only in my notebook, notes for several jobs were all on one page or they were never in the job folder where I needed them months later. Then I discovered sticky notes.

The 2"x2" size became the hard copy of my brain. I would keep several pads in my car, on my desk and in my notebook. One thought or phone number per page. Then they were posted in the location best suited to be completed or saved; the dash of my Jeep, on the wall by my desk or at home by the phone. They all went into the appropriate job folder and months later I still had the phone number, address, or summation of a phone call.

In spite of technology and the Internet offering us text messaging, emails and other forms of communication, I still find sticky notes often the fastest way to initially preserve a thought, which I can then transfer easily to another medium when I have time.

Notes in the Cloud - There are many note-taking apps that are available for all the different I-Phones, Android Phones, Blackberries, I-Pads, tablets, etc. Most of these include the feature of storing the information on the Internet Cloud and then automatically syncing with multiple devices.

Many apps also enable you to verbally dictate notes that are then converted into text on the spot. This allows you to take quick notes on site or in a meeting and then when you return to your computer, you can flesh out the document, save it and then share it through texting, email, fax or other media.

I often take the notes of the meeting on my phone and send them to the other party at the conclusion so we both have exactly the same notes and written agreements. They can be organized and printed out later to preserve a hard copy.

Photos and Videos - There is no easier way for owners to document their contents, as well as the progress of a job, than with photos. In less than 2 minutes, you can take several pictures of a room and have concrete documentation of your possessions. In less than an hour, you can have a record of everything you own.

Taking photos is no longer hard nor expensive and often they can be shared, even while you are talking on the phone, enhancing the communication experience.

It is a skill to learn what to photograph. I used to go back through the shots I had taken and the item I was looking for was always just outside the frame. Lots of practice will teach you what will likely be needed later. The more photos you take, the greater chance you have of documenting what you need.

The best way to photograph is the way movies are filmed. 

     First take a wide shot of each wall,
     Then take closer details of each shelf, 
     Then close-up shots of items of greater value or interest,
     Possibly both front and back.

Videos are also great for documenting larger areas, such as the exterior of a building, large rooms or piles of content. It is important to pan slowly and remain for at least 5 seconds on each area or item or you will become motion sick playing it back or have to continually pause the video.

It is important to store an additional copy of your documentation at another location or on the Cloud. I had one client with several collections of rare and expensive items. Fortunately she saw a show on TV encouraging everyone to photograph their items. She grabbed her son's digital camera, went around the house and took about 600 pictures. Two weeks later, they had a fire that destroyed 90% of their home and all of her collections. We found the camera on the floor in her son's bedroom submerged in 6 inches of water. The SD card was undamaged and she was able to be compensated for all her years of hard work.

Whatever method or methods you use to document your loss, the better you do it, the less your chances are of ending up in court. Most of these ideas are simple and easy once you decide to develop the habit.  

Remember, he who has the most paper work usually wins.

It is Everyone's Job - It is important for each of us to take responsibility for our own documentation. The extra time spent properly documenting always saves you time and lots of money. Documenting responsibly and regularly is one of the paths to happiness and peace of mind.