C&R Report: Carriers and Cashflow Keep Restorers up at Night

C&R Report: Carriers and Cashflow Keep Restorers up at NightThere have been several headwinds impacting the restoration industry over the past few years including the lingering uncertainty caused by a pandemic, rising interest rates, threat of a recession, and challenges with labor supply. These forces have required business owners to navigate multiple challenges and redirect their teams to find opportunity and growth.

In their State of the Industry Report for 2022, C&R analyzed and summarized data from 150 leaders of independent companies and franchises. The report highlights many ongoing trends in the cleaning and restoration industry. Notably, it finds that (1) dealing with insurance companies, (2) maintaining sufficient cash flow levels, and (3) hiring labor are the three main things keeping company owners up at night.

When it comes to addressing some of these concerns, we at One Claim Solution (OCS) can provide a solution. We are a third-party insurance billing specialist that works directly with carriers on behalf of restorers to optimize the invoicing and collections process. Our expertise and services help contractors to better deal with carriers and manage their cash flow – two of the three things that keep them up at night the most.

Dealing With Carriers

One main challenge restorers face is negotiating payment with insurance carriers. When restorers complete a job, they should expect timely and sufficient payment for the services they delivered. However, this is often not the case as the billing and collections process is usually hindered by inefficient back-and-forth communication with adjusters. It should be no surprise then that contractors want to distance themselves from carriers. 

According to C&R State of the Industry Report, contractors want to decrease their reliance on the third-party administrators (TPAs) that work on behalf of insurance carriers. In fact, almost half (45%) would prefer not to do any TPA work at all while very few want more than 30% of their work from TPAs.

A TPA is an organization that provides operational services under contract to another company. Insurance companies often outsource claims processing and vendor management to third parties. Whether TPA’s do more harm than good is a debatable topic in the restoration industry, but there are definite benefits that come from TPA work, including reliable leads, a steady volume of work, and opportunities to become a specialized service provider.

Despite these benefits, most contractors still prefer to lean away from TPA’s. Here are some of their reasons:

  • Thinner profit margins: Contracts, often dictated by the carriers, have strict pricing and service-level requirements which make it difficult for a contractor to generate margin on a job. Some contractors accuse TPAs of further undercutting them and creating roadblocks to make any margin at all.
  • More administrative requirements: Working with TPAs requires the adoption of their claims system which can be a laborious experience. Program work creates an administrative burden on the company staff – estimators, project managers, and technicians are all given additional duties which strain their efforts.
  • Costly fees: Access to TPA services require enrollment and referral fees which don’t always lead to immediate benefits. 

“With so many restoration firms indicating a strong desire to transition away from TPA programs, we predict that this will create both opportunities for firms that optimize for TPA work and create significant pressure on TPA providers to find ways to change aspects of their operation that are driving so many restorers to look elsewhere for their revenue needs.” (C&R State of the Industry 2022, Chapter 2)

At One Claim Solution, we work with restoration contractors who are not overly reliant on TPA work. We are better suited to help more independent contractors increase profitability and accelerate cash flow because they are not limited by a set of contracts that impose the pricing, service level, or operational requirements of the carriers. You will sleep better at night knowing our well-trained claim advocates are more than capable to deal with the carrier on your behalf.

Managing Cash Flow

“A common area of frustration in the restoration industry is the need for a more streamlined process of collecting job payments. Business leaders point out that getting paid is a problem.” (C&R State of the Industry 2022, Chapter 7).

Waiting to get paid is always frustrating. Without an advocate, the billing and collection process can be laborious for contractors. According to C&R’s State of the Industry Report, it takes most (~80%) contractors more than 30 days to get paid in full after a job is complete, and for a little more than half of contractors, the wait time is greater than 45 days. While there is some variation in these metrics by job and contractor types, almost no one wants to wait more than a month to get paid, especially with the added stresses of keeping up with payroll and overhead costs.

There are several reasons why it takes so long for contractors to get paid. One of them is inefficient communication with adjusters. The claims process can be complicated, and it requires a lot of back and forth between the contractor and the adjuster. When contractors are out working on restoration jobs, they may not always have the time to drop everything and answer questions from the adjuster, which can prolong the process. 

At One Claim Solution, we work with adjusters on behalf of contractors to accelerate the claim management process – resulting in our clients getting paid in 32 days, on average.

Three things are needed to accelerate a receivables cycle – people, technology, and processes. Our billing process is supported by a team of highly qualified claim advocates. We’ve created an intensive training program that ensures our advocates are equipped with the tools and expertise to justify invoices. Our understanding of industry guidelines and legal knowledge for restoration work helps us get our clients the optimal amount for the jobs they perform. Additionally, outsourcing insurance billing to a team of specialists can save contractors from having to hire and manage an in-house billing team. A side-effect of working with One Claim is decreased office staff turnover and increased focus on training field staff.

We also built proprietary software that helps our claim advocates stay on track and manage invoices through a carrier’s claims process. Jeremy Traasdahl, a Co-founder of One Claim and the mastermind behind the software, says “Our software is the backbone of our claims management process. We originally created it to store claim documents, capture adjuster communication, and give our claim advocates something to track their work with. Over the last six years, we’ve built in automation, robust data capture technology, and nuanced sequencing that reflects our deep experience with insurance billing,” Traasdahl said.

A lot of documentation and communication occurs throughout the lifecycle of a claim, and it’s important to keep a record of it all. Our software not only does that, but it also reminds our team to take action at certain points in the process. Purpose-built software helps our claim advocates stay on top of invoices and ultimately accelerate cash flow.

Lastly, we have a rigorous claims management process that has been built out over the last six years. The roles and responsibilities of our claim advocates and technologies are well mapped and in sync with one another throughout the billing and collection process. Since each carrier has a different way of processing claims, it’s important for the process to be rigid and flexible at the same time. It’s a tricky balance to maintain if you’re not solely focused on it. 

Jason Podany, owner of PureTec, a cleaning and restoration company based out of Mesa, AZ, notes that he has seen exponential growth in his business since partnering with OCS almost five years ago. “OCS is a great source I wish I knew about on day one. I have the utmost respect for these people. I’ve worked with them for years, and it’s been a great experience,” Podany said. “Since OCS started doing our insurance billing, my business has grown by 4x!”

Contractors only have so much money to work with when they’re running a business and want to reach their profit goals. Working with OCS will not only accelerate cash flow, but also alleviate staffing labor to manage the receivables process resulting in more time and resources to focus on other important aspects of a restorer’s business.

Looking Forward to 2023

At One Claim Solution, we are dedicated to helping restoration contractors reach their goals. Success for contractors in the coming year will be largely dependent on a series of strategic decisions, which may include partnering with an insurance billing specialist like us. A streamlined billing process will get contractors paid faster, which gives them the time and means to perform more jobs, manage their field staff, and focus on other important aspects of building a great business. Let us deal with the insurance carriers and help manage cash flow so you can – among other things – sleep better at night!