Basic Accounting During Your Rebuild: Staying Organized and Understanding Money Flow

Managing the finances of a home rebuild after a disaster can feel overwhelming, especially when insurance companies, banks, contractors, and personal funds are involved. Learning basic accounting principles and staying extremely organized will greatly simplify your rebuild, speed up insurance reimbursements, and reduce stress.

This Rallyback article walks you through the essentials of organizing your financial records, understanding the flow of funds, and tracking expenses effectively during your rebuild.

1. Getting Organized: Your Primary Documents

To keep your accounting in order, start by identifying and securely storing your key financial documents:

• Invoices: From contractors, suppliers, designers, architects, engineers, and other professionals.

• Receipts: For every purchase, from major building materials down to small items and services.

These documents are crucial when submitting expenses to insurance, the bank, or a Public Adjuster (PA).

2. Accounting Basics: Tracking Expenses

You don’t necessarily need specialized software like Quickbooks, but you do need to create a clear and accessible accounting system. At a minimum, your system should:

• Clearly identify what your insurance has paid and what remains.

• Track what you owe the Contractor and when payments are due.

Working with Insurance-Friendly Contractors

It’s particularly helpful to have a contractor who has experience working with insurance claims. They can:

• Help organize expenses according to your insurance Policy’s coverage categories (or "buckets"):

  • Coverage A (Dwelling)

  • Coverage B (Other Structures)

  • Ordinance & Law coverage

  • Debris Removal

  • Landscaping

  • Personal Property

• Properly package invoices for each coverage category, streamlining your claims submissions.

Leveraging a Public Adjuster

If hired, one important service a Loti Public Adjuster provides is expert accounting and documentation of losses and rebuilding expenses. A good PA:

• Organizes and packages your financial documentation accurately.

• Maximizes your recovery from insurance by clearly demonstrating eligible expenses and reimbursements.

Why Organized Accounting Is Essential

Consider this scenario:

• Your insurance initially pays out a combined $1,000,000 for Coverage A & B.

• Your policy includes an Extended Replacement Cost provision, granting an additional 25% ($250,000).

• To access this additional amount, you must fully account for the initial $1 million first.

• Once documented, you submit additional expenses to claim the extra $250,000.

Without detailed records from the very first dollar spent, you risk losing out on these crucial extra funds.

Loti can help:

Loti provides a suite of financial tools and services to help you manage all the associated accounting hurdles of your rebuild.

3. Understanding the Flow of Money

In a rebuild scenario, funds typically reside in four main places:

1. Insurance Company

2. Bank (Mortgage Escrow)

3. Your Personal Accounts

4. Contractor

Understanding clearly where the money is at any given time—and who owes what—is critical. This understanding is the key to smooth communication and preventing costly delays.

Managing Funds with a Mortgage

If you have a mortgage, your bank holds a significant portion of your insurance payout in an escrow account, releasing funds in stages as your rebuild progresses.

Example:

• Suppose you have a total insurance payout of $1,000,000.

• Initially, the bank might release $200,000 to start construction.

• Subsequent payments are only released after specific stages and inspections are completed. Typical inspection milestones (the number and type vary by district, bank and more but are similar in practice to construction loans) include:

  • Foundation

  • Framing

  • Roofing

  • Electrical

  • Drywall and finish work

Bank Inspections

Each milestone will require both county inspections and bank inspections. After the county approves a stage, the bank sends an inspector:

• Once approved, the bank releases additional funds to pay your contractor.

• Keep your bank informed with regular accounting updates and provide all documentation promptly to avoid delays.

• Final payments are typically withheld until the bank completes a Final Inspection.

Wrap-Up: Organization is Key

Your rebuild will involve significant financial complexity. Learning basic accounting, staying highly organized, and understanding the flow of money between insurance, banks, and contractors are essential skills. This careful organization not only simplifies your rebuild, but also helps you maximize your available insurance coverage, keep your construction project on track, and ensure a smoother, less stressful recovery.