The thrill of closing a roofing deal, the satisfaction of a job well done – these are the rewards that draw many into the roofing industry. However, beneath the surface of successful installations and satisfied customers often lies a persistent and often crippling challenge: CASH FLOW. For roofing contractors, especially those heavily involved in insurance claim work, waiting 60, 90, or even 120 days to get paid after completing a project is not just an inconvenience; it can be a threat to the very survival of their business.
In a recent podcast from The Roofer’s Helper, Richie Rossouw from Thunder Media sat down with Matt Frugé of SquareDash, a company specifically designed to tackle this exact problem. Matt’s journey into the roofing world wasn’t a straight line. Starting with aspirations in naval photography, he eventually found himself knocking doors for a roofing company in the Dallas-Fort Worth area. This unexpected entry point blossomed into his own successful roofing business, which he ran for over a decade.
It was during these years at the helm of his own company that the stark reality of cash flow issues hit hard. Despite handling $45 million in business in 2018, Matt’s company almost went under twice due to the lengthy payment cycles associated with insurance claims and large commercial jobs. This experience ignited a quest for a solution, leading to the birth of SquareDash. As Matt aptly put it, the biggest stress wasn’t lead generation or sales, but the constant worry of “how much money can we collect this week? How do we keep the business alive?”.
The Unique Cash Flow Challenges of Insurance Restoration
Roofing contractors dealing with insurance claims face a unique set of financial hurdles. Unlike retail work where payment is typically received more quickly, insurance payouts involve third parties and often protracted processes. As Matt explained, in storm-prone areas like North Texas, very few homeowners pay cash for a new roof, making insurance work the dominant market.
The struggles often start with a lack of initial funding, forcing contractors to rely on their own bankrolls and the promise of future insurance payments. The focus naturally shifts to securing deals and growing the front end of the business, often leaving the back-end financial processes underdeveloped. Finding skilled individuals who understand the nuances of insurance-related billing and the long wait times for payment can be a significant challenge.
As the podcast highlighted, the financial side of a roofing business is intricately linked to every other aspect. A seemingly lucrative $30,000 contract loses its luster when the payment cycle stretches to six months or more.
The Importance of Financial Acumen: Beyond the Bank Balance
A common pitfall for roofing contractors is relying on “bank balance accounting” – simply looking at the total in their account and assuming it’s all available for business operations. Matt emphasized the critical difference between accrual-based accounting and cash-based accounting, as well as the importance of work in progress (WIP) accounting for contractors.
- Accrual vs. Cash Accounting: Accrual accounting recognizes revenue and expenses when they are incurred, regardless of when the cash actually changes hands. Cash accounting, on the other hand, records transactions only when cash is received or paid out. For contractors dealing with long payment cycles, accrual accounting provides a more accurate picture of their financial health.
- Work in Progress (WIP) Accounting: This method is crucial for contractors dealing with deferred payments. Instead of recording customer deposits as immediate income, WIP accounting places these funds in a deferred revenue account on the balance sheet, recognizing it as a liability until the work is complete and payment is received. Similarly, the costs associated with a job (labor and materials) are tracked in a work in progress asset account until the job is finished. This prevents the illusion of profitability based solely on deposits and helps contractors avoid the dangerous cycle of using funds from one job to cover the expenses of another.
The podcast stressed that while a skilled bookkeeper knowledgeable in these areas is invaluable, the owner must also have a conceptual understanding of these financial principles. Relying solely on the bank balance can lead to a false sense of security and mask underlying cash flow problems. Furthermore, incorrectly recording customer deposits as income can lead to significant and unwelcome tax implications. Matt strongly recommends having multiple bank accounts and setting up the chart of accounts correctly in accounting software to maintain clear segregation of funds.
SquareDash: A Purpose-Built Solution for Roofing Cash Flow
Recognizing the lack of suitable financial products for roofing contractors, Matt and his team developed SquareDash. Unable to secure traditional bank loans or lines of credit due to the industry’s perceived risks and seasonality, and wary of the predatory terms of merchant cash advances, they created a solution rooted in invoice factoring.
At its core, SquareDash purchases a contractor’s receivable (the money owed by the insurance company for a completed or in-progress job) at a discount. This provides the contractor with immediate cash flow without the burden of interest charges or long-term debt. Unlike loans that need to be repaid regardless of payment collection, SquareDash’s model is tied directly to the specific job. This cost can even be factored into job costing and potentially shared with sales representatives.
More Than Just Funding: Managed Billing Services
Initially focused solely on invoice factoring, SquareDash evolved based on feedback from contractors who still faced the administrative burden of collecting payments. This led to the introduction of managed billing services. Now, SquareDash can act as an extension of a contractor’s back office, handling the often tedious and time-consuming process of following up with insurance carriers, mortgage companies, and homeowners to ensure timely payment.
Matt drew an analogy to medical billing, where the doctor focuses on patient care while a separate entity handles the complexities of insurance claims and billing. SquareDash aims to be that dedicated billing department for roofing contractors, allowing them to focus on sales, production, and customer satisfaction.
Streamlining the Process: Technology and Expertise
To facilitate this process, SquareDash utilizes technology to streamline the collection of necessary documentation, including contracts, insurance scopes, and invoices. They have even developed patented technology to parse insurance scope information, understanding the claim logic and payment structure.
A significant pain point in insurance claim work is dealing with mortgage endorsements on checks. SquareDash has partnered with iink Payments to expedite this process, allowing contractors to potentially access funds even before the mortgage company fully processes the paperwork.
The Benefits of Partnering with SquareDash
The podcast highlighted numerous advantages for roofing contractors who utilize SquareDash:
- Immediate Cash Flow: Access funds quickly upon completion or even during the progress of a job, rather than waiting weeks or months for insurance payouts.
- Reduced Administrative Burden: Offload the time-consuming tasks of billing, follow-up, and dealing with insurance and mortgage companies.
- Improved Sales Team Efficiency: Free up salespeople from collection duties, allowing them to focus on generating new leads and closing more deals, potentially leading to a significant revenue lift.
- Better Financial Management: Gain a clearer picture of their financial standing and avoid the pitfalls of relying solely on bank balances.
- Reduced Risk: SquareDash handles the complexities of mechanics liens in case of non-payment, ensuring compliance with state-specific regulations.
- Scalability: Access the working capital needed to grow their business without being limited by slow payment cycles.
Looking to the Future: AI-Powered Efficiency
SquareDash is not resting on its laurels. Matt teased the upcoming launch of an AI assistant designed to further automate and streamline processes for contractors. This browser-based tool will integrate with popular CRM systems, providing reminders for tasks like invoicing and lien filings, drafting emails, and even reviewing vendor invoices for discrepancies and assisting with supplement writing. This commitment to innovation underscores SquareDash’s dedication to providing comprehensive solutions for the roofing industry.
Is SquareDash Right for Your Roofing Business?
According to Matt, SquareDash’s sweet spot is with roofing companies doing $2 to $15 million in annual revenue, particularly those navigating the challenges of transitioning from a smaller operation to a more established business. Companies in growth mode that can leverage improved cash flow to expand their operations will see the most significant benefit.
If you’re tired of the cash flow rollercoaster that comes with insurance restoration work, if you’re spending too much time chasing payments, or if you’re looking for a way to fuel your business growth, SquareDash offers a compelling solution.
To learn more and schedule a consultation, visit squaredash.com. Don’t let cash flow be the bottleneck holding your roofing business back. It’s time to stop waiting and start growing.
