🧾 The Role of the CPA in Surety Reviews

Your CPA isn’t just compiling numbers. A good construction CPA is preparing a financial narrative for your surety—one that tells the story of how you manage risk, plan for growth, and control project outcomes.

During the annual bonding review, the CPA’s job is to present clear, GAAP-compliant financials that help the surety assess:

• Your working capital and liquidity position
• How you’re managing your backlog
• Whether your job cost forecasts are reliable
• If your company is building equity year over year

These reviews aren’t just about last year—they set the tone for how much bonding credit you’ll have for the year ahead.

📋 What Surety Underwriters Look For

Surety underwriters aren’t just running formulas. They’re evaluating you like a financial partner.

Here’s what’s on their checklist during a review:

1. Work-in-Progress (WIP) Schedules
Are projects profitable? Are you billing accurately? Are there signs of fading profits or over/under-billings that could hint at poor forecasting?

2. Job Cost Forecasting Accuracy
Do your projections match actual outcomes? Are you adjusting forecasts as conditions change?

3. Cash Flow Health
Can you fund work without relying on deposits or future draws? Sureties want to see positive cash flow from operations—not just paper profits.

4. Debt Management
Too much short-term debt or reliance on lines of credit can raise concerns. Sureties want to see responsible, long-term financial planning.

5. Net Worth & Retained Earnings
Is the business growing equity or just breaking even? A rising net worth tells underwriters you’re building a more stable company over time.

6. Internal Controls & Management Team Strength
This one’s intangible—but powerful. Underwriters pay attention to how organized your books are, how clearly your CPA explains the numbers, and whether the leadership team seems proactive or reactive.

🛠️ How to Prepare for a Surety Review

1. Keep Job Cost Reports Up to Date
   Underwriters want to see you know your numbers. Don’t wait until year-end to clean things up.
2. Work Closely With Your CPA Year-Round
   Don’t treat them like a once-a-year service. A CPA who understands your operations can be your biggest asset in securing bonding.
3. Avoid Aggressive Revenue Recognition
   Padding profits might look good short-term but will hurt you in the WIP analysis. Be realistic.
4. Build Working Capital and Retain Earnings
   Reinvest profits wisely—underwriters want to see that you're strengthening the business, not just pulling out cash.
5. Document Your Internal Controls
   From approvals to change order tracking to billing practices—clear documentation shows discipline.

Final Thought

CPA-led surety reviews aren’t something to fear—they’re an opportunity. When your financials are clean, your controls are tight, and your story is consistent, you’re in a strong position to ask for more bonding capacity and take on bigger projects.

💬 If you’ve gone through one of these reviews recently, what did you learn? What caught you by surprise?

Let’s help each other raise the bar.

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