How Can I Tell if My Water Restoration Chart of Accounts Is Good?

May 11

Your chart of accounts (COA) is the backbone of your financial reporting. For water restoration businesses, having a well-organized, industry-specific COA is what separates usable financial insights from an overwhelming mess of numbers. But how do you know if your chart of accounts is actually good—or if it's hiding inefficiencies, bad margins, or profit leaks?

Let’s break down how to evaluate your COA and what a strong one should include.

1. Are Revenue Streams Clearly Separated?

A good COA will separate different types of revenue. For example:

Water mitigation
Mold remediation
Reconstruction or rebuild work
Equipment rental or monitoring fees
Consulting or insurance claim services

If it all just dumps into a single “Income” account, you’re missing valuable visibility. You want to know where your margins are best—and where you might be working hard for low return.

2. Are Direct Costs Clearly Tracked as COGS?

In restoration, Cost of Goods Sold (COGS) should reflect the true job costs, like:

Subcontractors
Materials and equipment purchased for jobs
Drying equipment rental
Job-specific labor (if tracked separately)

Too often, we see all labor dumped into Overhead, or material purchases mixed into “Office Supplies.” That makes job profitability impossible to measure.

3. Is Labor Split Between Job Cost and Overhead?

If you're using labor both in the field and in the office, split it:

Direct labor (field techs, project managers) → Goes to COGS
Indirect labor (admin, sales, owner draws) → Goes to Overhead

This matters for calculating job-level margin and labor utilization, two key KPIs in restoration.

4. Can You Easily See Your Overhead by Category?

Your Overhead accounts should be grouped logically so you can review trends and spot problems fast. Common categories include:

Rent and utilities
Vehicles and fuel
Insurance (general liability, workers comp)
Advertising and marketing
Admin wages and benefits
Software and tech tools (like Xactimate, PSA, etc.)

If your overhead feels bloated but you can't pinpoint why—your COA may be too vague.

5. Do You Have a Category for “Owner Pay” or Distributions?

Many owners accidentally underpay themselves, or lump personal expenses into business costs. Having a clear Owner’s Draw or Distribution line helps track what the business is truly costing to run—and helps your accountant sort it properly at tax time.

6. Are Equipment, Vehicles, and Loans Tracked Separately?

A good COA should have separate balance sheet accounts for:

Equipment purchases (as assets)
Loans or credit lines
Vehicle value and depreciation
Lease obligations

That way, you can calculate Return on Assets and ensure financing isn’t hiding inside operational expenses.

7. Are You Getting Reports That Help You Make Decisions?

Ultimately, the test of a good chart of accounts is this:
Can you pull a Profit & Loss report and immediately spot red flags, performance trends, or opportunities?

If your financial reports feel confusing or vague, the problem often lies in the COA.

Final Thoughts

A strong chart of accounts isn’t just bookkeeping—it’s strategy. It helps you price jobs right, manage cash flow, and grow with confidence. If you’re not sure whether your current setup is giving you the insights you need, we can help.

Want to review your chart of accounts with a restoration-focused financial pro?
Schedule a free strategy call with Kiwi Cash Flow and we’ll walk through it together.

Michele Gray