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Company Financial Statements
Financial information is a key component in the underwriting process. Great
care should be taken to provide quality year-end financial statements
prepared by a CPA knowledgeable in construction accounting. Company
financial statements prepared by the contractor in-house are rarely accepted
in today's surety market.
All bonding companies prefer statements that…
1. are reviewed by a CPA containing the cover letter, balance sheet,
profit & loss statement, and statement of cash flows. Depending on the size
of your firm and scope of work a CPA's compilation may be acceptable but
without a reviewed statement, surety companies are less likely to extend the
bonding capacity you desire.
2. are prepared using the following two accounting methods:
• The accrual accounting method allows for the inclusion of income and
expense items as they are earned or incurred, even though they may not have
been received or paid in cash. The alternative is cash basis accounting.
• The percentage-of-completion accounting method allows sales and costs to
be recognized each year based on the value of work performed.
3. include notes pertaining to individual line items in the balance
sheet and a schedule of work-in-progress.
Company financial statements containing these three characteristics will
give you more flexibility in your bonding relationship and are well worth
the cost you may incur in having them prepared.
Personal Financial Statements
Download The Personal Financial Statement (CLICK HERE)
Personal financial statements may be self-prepared. Bonding companies prefer
that dates of company and personal statements coincide but these may be
prepared in-house.
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