What Questions Can the Balance Sheet Answer?
Why Restoration Companies Should Pay Attention to More Than Just the P&L
Most restoration business owners are familiar with their Profit & Loss Statement (P&L). It tells you how much revenue came in, how much went out, and whether you made a profit for the month or year.
But there’s another financial report that’s just as important—arguably more important for long-term stability—and it often gets ignored:
👉 The Balance Sheet.
If the P&L shows performance, the Balance Sheet shows position.
It tells you where you stand—not just for a single month, but at a point in time. And it answers questions the P&L never will.
What Is a Balance Sheet?
The balance sheet is one of the three core financial statements, alongside the P&L and cash flow statement. It summarizes three things:
Assets – What the business owns
Liabilities – What the business owes
Equity – What’s left over (the company’s net worth)
Think of it as a snapshot of your restoration company’s financial health.
While the P&L tells you if you made money, the balance sheet tells you if you’re building something solid.
What Questions Can the Balance Sheet Answer?
If you’re not using your balance sheet regularly, you’re flying blind in some key areas of your business. Here are just a few questions that the balance sheet can help you answer:
💡 Do we really own the cash in the bank?
You might have $100,000 sitting in the checking account, but that doesn’t mean it’s all yours.
Do you owe vendors for work already completed?
Did you take large deposits for work you haven’t done yet?
Are you behind on payroll taxes?
The balance sheet helps you identify whether that cash is truly available or already committed.
Restoration bookkeeping tip: Look at your liabilities—especially accounts payable, credit cards, and unearned revenue—to understand how much of that cash is already spoken for.
💡 Are our receivables under control?
The balance sheet tracks Accounts Receivable (A/R)—the amount you’ve invoiced but haven’t collected.
A growing A/R balance might mean:
You’re scaling fast and managing billing well
Or… you’re not collecting fast enough and risk cash flow problems
Fractional CFO tip: Divide your A/R balance by your average daily sales to calculate your Days Sales Outstanding (DSO). The higher the number, the slower you're getting paid.
💡 Are we carrying old debt?
Your balance sheet shows loans, lines of credit, credit cards, and other liabilities. If balances aren’t shrinking over time—or if they’re growing—it could mean:
Cash flow isn’t strong enough to support operations
You’re financing losses without realizing it
You’re growing too fast without enough retained earnings
Strategic finance insight: High debt-to-equity ratios can make your business risky for lenders. Track these monthly if you're planning to grow or sell.
💡 Is the business actually growing in value?
You’re not building a restoration business just to keep busy—you’re building an asset.
The equity section of your balance sheet shows the net worth of the business. If equity is growing over time, it means:
You’re consistently profitable
You’re reinvesting those profits
You’re building something you could one day sell
If equity is flat or declining, it’s a red flag—even if revenue is growing.
💡 Are we buying equipment outright or financing everything?
Your balance sheet also shows your fixed assets—vehicles, drying equipment, trailers, etc.—and how they were financed.
It answers questions like:
Are we investing in the right tools for the work we do?
Are those investments paying off in efficiency and margin?
Are we over-leveraging ourselves with debt?
This is especially important in restoration, where equipment needs can be capital-intensive.
💡 Are we using profit to fund growth—or borrowing to stay afloat?
The P&L might show positive net income, but if your cash is shrinking and liabilities are growing, it’s time to dig deeper.
The balance sheet helps you see whether your growth is self-funded (ideal) or debt-funded (risky).
This kind of insight lets you make smarter decisions about:
Hiring
Expanding into new services
Taking on large jobs with extended timelines
Why Restoration Companies Ignore the Balance Sheet (and Why That’s a Mistake)
It’s not uncommon to hear restoration owners say things like:
“I don’t understand the balance sheet.”
“My CPA looks at that, not me.”
“I just focus on cash and sales.”
But here’s the truth: ignoring the balance sheet means missing out on one of the best tools for building a strong, stable business.
If you want to:
Reduce risk
Improve cash flow
Make confident decisions about growth
Build a business that someone else could run or even buy someday
…then the balance sheet has to be part of the conversation.
Get Help Turning Your Balance Sheet Into Strategy
At Kiwi Cash Flow, we work exclusively with restoration companies to translate their financial data into meaningful insight. That includes:
✅ Balance sheet reviews
✅ Cash flow analysis
✅ Profit planning
✅ KPI tracking
✅ Monthly reports that make sense to real business owners—not just accountants
Whether you need cleanup, clarity, or a long-term partner, we help you build a restoration business that’s not just busy—but stable, profitable, and scalable.