Insurance work is the lifeblood of many roofing companies—but it’s also the source of their biggest financial blind spots. Ask any roofing owner what’s most profitable and they’ll tell you: “Insurance jobs.” And that’s true… in theory.
In practice, insurance work quietly destroys financial accuracy when it isn’t tracked with precision. The payment structure, supplements, depreciation, and timeline distort revenue, hide cash flow problems, and make profit look healthier than it is—until tax season exposes the truth.
If your roofing company is doing $1M+ in annual revenue and relies on insurance work, your books cannot be run like a standard contractor’s. Insurance accounting is a specialized system with moving targets. And most internal bookkeepers aren’t trained for it.
This article breaks down the hidden financial risks of insurance work—and what roofing companies need to protect their margins.
The Financial Flow of Insurance Jobs Is Completely Different
Insurance roofing work is fundamentally irregular. Payments come in unpredictable phases:
- Initial ACV check
- Homeowner deductible
- Supplement approvals
- Final RCV check
- Mortgage company releases
- Unexpected re-inspections
The money comes in pieces, often delayed, rarely matching the estimate, and almost never in the same accounting period that work was performed.
That means standard construction bookkeeping does not work.
Insurance jobs require:
- careful revenue recognition
- matching each payment to the correct job
- coding supplements accurately
- tracking recoverable depreciation
- reconciling actual costs to revised estimates
If even one step is mishandled, the entire job looks profitable or unprofitable on paper for the wrong reasons.
The Most Common Accounting Errors With Insurance Jobs
Here’s what we see repeatedly when reviewing the books of $1M+ roofing companies:
- Recording Insurance Checks as Final Revenue
Insurance payments often include multiple components:
- ACV (Actual Cash Value)
- Depreciation
- Supplements
- Withheld funds
- Mortgage endorsements
If these aren’t separated and coded correctly, the revenue recognition becomes impossible to untangle.
- Depreciation Is Treated Incorrectly (or Not at All)
Recoverable depreciation isn’t “income”—it’s conditional future revenue.
When internal bookkeepers record it as immediate revenue, the month looks profitable when it isn’t. This creates a false sense of cash flow strength, especially during storm season.
- Supplements Aren’t Tied to Job Costs
Supplement income often comes weeks—or months—after the job ends.
If the job costs aren’t adjusted, the supplement makes the job look artificially profitable, distorting your margin analysis.
- Deposits and Draws Hit the Wrong Period
This leads to:
- inflated revenue months
- flat margin months
- confused tax liability
- inaccurate job profitability reports
Roofing owners end up thinking they had a strong month because the bank balance was high, when in reality, it’s just insurance lag.
- Mortgage Companies Slow Everything Down
Checks go out. Checks come back. Signatures are needed. Homeowners are confused.
This delay makes accrual accounting essential—but most in-house bookkeepers are doing cash accounting.
- Subcontractor Timing Doesn’t Match Payment Timing
Subs may be paid well before insurance payments hit.
This creates a cash flow gap we see all the time:
“We completed $150,000 worth of work last month… so why is there only $12,000 in the bank?”
Because the insurance system isn’t built for your cash flow needs. Your accounting has to bridge the gap.
Insurance Work Creates the Illusion of Profitability
Here’s the hard truth: Many roofing companies look profitable on paper during busy storm months—because the insurance money hitting the bank makes everything look strong.
But when you dig into the actual job costs, you often find:
- labor overruns
- decking surprises
- multiple delivery fees
- additional materials
- extra sub days
- added ventilation
- roof reinforcement for storm upgrades
- lost credits
- improperly logged supplements
If your books aren’t built for job-by-job clarity, insurance revenue will hide margin leaks all year long.
And high revenue can mask low profit for years.
Bank Balance Accounting Is Dangerous for Roofers
Many roofing owners make decisions by looking at the bank account. This works for very small companies. Once you cross the $1M mark, it becomes financial Russian roulette.
Here’s why your bank balance includes:
- money for jobs you haven’t paid for
- deposits for jobs you haven’t done
- insurance checks with depreciation you haven’t earned
- supplement payments from work long finished
- old AR you haven’t reconciled
- mortgage-restricted funds you can’t use
But none of that is explained on your financial statements if accounting isn’t done correctly. You’re making decisions on incomplete information while thinking everything looks fine.
The Financial Risks That Grow With Insurance Volume
As your roofing company grows, insurance-related inaccuracies compound:
- Misstated profitability – Jobs look profitable until the books are corrected.
- Pricing decisions based on bad data – Estimators think they’re hitting margins… until a proper job cost workflow shows otherwise.
- Hiring decisions made during “false” strong months – You may bring on extra crews or salespeople during a revenue spike caused by insurance payments, not true profit.
- Cash shortages during slow months – Because revenue is not aligned with job completion.
- Tax surprises – If depreciation and supplement income are improperly recorded, taxable income is overstated.
What Proper Insurance Accounting Actually Looks Like
A roofing company doing $1M+ needs a system built around insurance revenue timing—not standard contractor accounting.
Here’s what that system includes:
- Categorized Insurance Payment Components
Each payment should be broken down as:
- ACV
- Deductible
- Recoverable depreciation
- Supplement
- Homeowner contribution
- Mortgage adjustments
This alone stops a huge amount of revenue confusion.
- An Accrual-Based Revenue Recognition Process
Record revenue when work is done, not when checks arrive.
This gives you:
- real gross margin
- accurate monthly profitability
- reliable cash flow forecasting
- A Job Costing System Tied to Every Insurance Update
Every supplement, every change order, and every final adjuster approval must be tied back to the job to understand true profitability.
- Monthly Job Reconciliation
Every insurance job must be closed out with:
- matching payments
- final cost review
- supplement alignment
- subcontractor reconciliation
- material verification
- Clear Reporting That Separates:
- earned income
- unearned depreciation
- pending supplements
- insurance AR
- homeowner contributions
- restricted mortgage funds
This is how owners make decisions with clarity, not guesswork.
A Quick Real-World Example
A $2.8M roofing company came to us with “great insurance margins.”
Once we cleaned up the data:
- 40% of their insurance checks were coded as final revenue when they were actually ACV.
- Depreciation wasn’t separated.
- Supplements were booked the month they hit the bank.
- Subcontractors were paid weeks before revenue was recognized.
- Jobs that “made 45% margins” were actually at 22–28%.
Once we rebuilt their insurance accounting workflow, their team finally understood:
- which jobs were actually profitable
- which supplements were stalling
- which salespeople were underbidding
- how much cash they truly had available
- how much revenue was still “waiting in insurance limbo”
They weren’t unprofitable.
They were simply operating blind.
Insurance work isn’t broken.
Roofers don’t fail because they can’t sell or produce work. They fail because they can’t see the truth in their numbers. And when your financial picture is distorted, every decision carries more risk than you realize. When your company is doing $1M+ in revenue, insurance accounting is not a task for a basic bookkeeper. nIt’s a specialized system—and it has to be built right.
If This Sounds Familiar, Let’s Talk
If any of this sounds uncomfortably familiar, it’s a sign your roofing company has outgrown basic bookkeeping.
You can schedule a no-pressure discovery call with Estmere here: If this sounds familiar, let’s talk.
