Understanding Xactimate Billing — And Why Your Books Probably Don't Reflect It Correctly
Your bookkeeper has never heard of Xactimate. Here's what that actually costs you — and what correct bookkeeping looks like for an insurance-driven restoration business.
Ask most bookkeepers what Xactimate is and you'll get a blank stare. Ask them how to handle a partial approval, a depreciation holdback, or a supplemental claim on an open job, and they'll start guessing — or, worse, they'll categorize it the same way they'd handle a normal contractor invoice.
This isn't a knock on bookkeepers. It's a statement about specialization. Xactimate billing is genuinely different from anything outside the insurance restoration world. If your bookkeeper has never worked with a restoration company, they cannot know what they don't know. And in this industry, what they don't know has a direct dollar cost to your business.
This guide explains how Xactimate billing actually works, where it breaks down in the books, and what correct restoration bookkeeping looks like. There's also an interactive walkthrough at the bottom that shows exactly how a single job should be recorded at each stage — and how a generalist bookkeeper records it instead.
Why this isn't like any other invoicing system your bookkeeper has seen
The estimate is not the invoice
The Xactimate estimate is the documented scope you submit to the insurance carrier — a line-by-line breakdown of every repair item, material, and labor cost. The amount you'll actually receive will likely be different, subject to adjuster negotiation, partial approvals, and depreciation holds. A bookkeeper who treats the estimate as the invoice is starting from the wrong number.
ACV vs. RCV — two different numbers
The carrier typically pays in two stages: ACV (Actual Cash Value) first — the depreciated value of what needs to be repaired — and then releases the RCV (Replacement Cost Value) holdback once repairs are verified complete. The difference between those two numbers is real money you're owed but can't collect yet. Most books don't track this gap.
Supplements change job value mid-stream
After work begins, additional damage is often discovered that wasn't in the original estimate. A supplement is submitted to the carrier to cover that additional scope. When approved, it increases the total job value — but the books won't reflect it until that approval lands, which can be weeks or months after the work was done. Jobs with open supplements have an understated revenue picture.
TPA billing adds an entirely separate layer
Third-party administrators manage claims for large carriers — contractors like Allstate, State Farm preferred networks, and DKI-affiliated programs often route through TPAs. TPA payments have their own portals, billing requirements, and payment schedules that look nothing like a standard insurance payment. A bookkeeper who doesn't recognize a TPA payment will almost always categorize it incorrectly.
One job. Three separate financial events. Most books only capture one.
Walk through a typical $95,000 water damage job and see how payment actually arrives — and what generalist bookkeepers miss at each stage.
ACV Payment
The carrier issues the initial payment based on the depreciated value of the damaged property. This is typically 60–75% of the total approved estimate — the rest is held as recoverable depreciation.
Supplement Approval
Additional damage found during work triggers a supplement. The carrier reviews, negotiates, and either approves or partially approves the additional scope. This may take weeks or months.
Depreciation Release
Once you've documented that the work is complete and submitted the required proof of completion, the carrier releases the held depreciation. This can take 90–180 days from the original loss date.
A cash-basis bookkeeper recording only what hits the bank will show this job as $68,000 revenue on Day 45 — missing $39,000 of legitimate receivables that are either approved or pending. That's not a bookkeeping preference. It's a materially inaccurate picture of what the job is worth and what the business is owed.
What generalist bookkeepers get wrong — and what correct looks like
Recording only cash received — not what's owed
The ACV check arrives and gets booked as the full revenue for the job. The depreciation holdback and any open supplements never appear as receivables. Revenue is understated, AR is incomplete, and the owner has no visibility into what's still owed from that job.
AR tracked by stage from estimate approval
When the Xactimate estimate is approved, the full approved amount becomes a receivable — split into ACV (collectible now) and recoverable depreciation (collectible on completion). Each stage is tracked separately so the owner always knows the total job value, not just what's been collected.
Treating Xactimate estimates as revenue
Some bookkeepers go the other direction: they record the full Xactimate estimate as revenue when the estimate is submitted — before it's been approved, negotiated, or paid. This overstates revenue with numbers that may never materialize at that amount, distorts job profitability, and creates AR that doesn't match what's actually owed.
Revenue recognized on carrier approval, not estimate submission
Revenue is recorded when the carrier approves the scope — not when you submit the estimate, and not just when cash arrives. This creates an accurate picture of what each job is worth at each stage of the collection cycle, without either overstating or understating the job's financial contribution.
Lumping supplements and depreciation into aging AR
Open supplements and held depreciation get mixed in with regular outstanding invoices in the AR aging report. The result: an AR report that doesn't tell you what's actually collectable. A $40,000 AR balance could be $30,000 in collectible invoices and $10,000 in depreciation holds — or it could be the reverse. The aging report doesn't distinguish.
AR categorized by type: collectible, pending supplement, pending depreciation
AR is broken into three meaningful buckets: invoices that can be collected today, supplements pending carrier approval, and depreciation holds pending completion documentation. Each category has a different follow-up process and a different expected timeline — and the AR report reflects that distinction clearly.
How a $95,000 job should be recorded — step by step
Walk through the life of a real water damage job and see exactly what should be in the books at each stage — versus what a generalist bookkeeper actually records.
Scope complete — Xactimate estimate submitted to carrier
You've documented the full scope of damage and submitted a $95,000 Xactimate estimate. The carrier is reviewing. No payment yet.
Carrier approves $92,000 — scope negotiated down slightly
The adjuster approves $92,000 of the estimate (a $3,000 reduction). The approved scope is the new baseline. ACV portion is $66,000; depreciation hold is $26,000.
ACV payment received — $66,000 deposited
Day 38. The initial ACV check arrives and is deposited. $26,000 depreciation is still held by the carrier pending verified completion.
Additional damage found — $11,000 supplement submitted
During work, hidden mold is discovered behind drywall. You document it and submit a $11,000 supplement to the carrier for the additional remediation scope.
Supplement approved at $9,500 — partial approval
Day 74. Carrier approves $9,500 of the $11,000 supplement after negotiation. Job total is now $101,500. The additional $9,500 is billable; $1,500 is absorbed.
Completion docs submitted — depreciation release requested
Work is verified complete. You submit photos, completion certificate, and final invoice to release the $26,000 depreciation hold + $9,500 supplement payment.
Final payment received — $35,500 deposited
Day 112. Depreciation release + supplement payment arrives. Job is fully collected at $101,500 total — $6,500 more than the original estimate.
What should be in your books right now
| Entry | Description | Amount | Status |
|---|
❌ Generalist bookkeeper (cash basis)
✓ Correct Xactimate bookkeeping
The generalist's books show $35,500 less revenue and zero open AR on a job that has $35,500 still owed. If you're making business decisions based on those books, you're working with an incomplete picture.
Four things that have to be in place — and usually aren't
AR tracked by collection stage, not just by invoice date
Each job has a running AR record broken into: ACV collectible, depreciation hold (amount and expected release date), and supplement status. The AR aging report distinguishes between what's overdue vs. what's pending a carrier process. These are fundamentally different categories that require different follow-up actions.
Supplement activity updated in real time — not just on cash receipt
When a supplement is filed, it's logged as a pending receivable. When approved, the approved amount updates the job value and moves to collectible status. When rejected, it's removed. The books reflect the current status of each supplement as it moves through the carrier's review process — not just when a check arrives.
TPA payments identified and correctly categorized
TPA payments often look like generic ACH deposits or checks from an unfamiliar entity name. Without knowing what to look for, they get miscategorized as miscellaneous income or lumped with unrelated revenue. Correct bookkeeping maps every TPA payment back to the originating job, the correct carrier, and the correct revenue category.
Job costing that connects Xactimate scope to actual costs
Each job has actual costs mapped against it — crew labor, subcontractor costs, materials, equipment — so gross margin per job is visible. Without this, you can have $2M in revenue and still not know which jobs made money and which ones you basically did for free. Xactimate gives you the revenue side. Job costing gives you the margin.
Six questions that reveal whether your books are being done correctly
| Question | Concerning answer | What it should be |
|---|---|---|
| "How are you tracking depreciation holdbacks on open jobs?" | Blank stare. "We record it when it comes in." | Separate AR line per job tracking held depreciation by expected release date. |
| "When a supplement is approved, how does that change the job's book entry?" | "What's a supplement?" or "We update it when the check arrives." | Approved supplement immediately updates the job's AR and revenue recognition. |
| "Show me the AR aging broken out by: collectible invoices, pending supplements, and depreciation holds." | Can't produce it. Everything is in one aging bucket. | Three-category AR report available on demand for any open period. |
| "Which TPA programs are our top 3 carriers using, and how do we identify their payments?" | Doesn't know. Looks up TPA payments by guessing from bank statements. | TPA payment sources are documented and mapped to carrier/job in the books. |
| "What's our gross margin on jobs completed last month, broken by job type?" | No job-level cost tracking. Only overall P&L available. | Job costing report available showing revenue, direct costs, and margin by job. |
| "If I showed you a Xactimate file, could you reconcile it to what's in the books?" | "What's a Xactimate file?" or has never tried this. | Yes — and this reconciliation happens regularly as part of the monthly close. |
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If your bookkeeper has never seen a TPA billing cycle, your books have gaps.
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