Why Sureties Examine Contract Assets—And How a Strong Financial Professional Protects You

Surety CFO

When contractors review their bonding file, one line item always draws attention from the surety: contract assets, often called under-billings.

To many contractors, this number just reflects work completed but not yet billed. But to a surety, contract assets reveal far more. They show billing habits, how well jobs are managed, how accurate your financial reporting is, and how reliable your cash flow will be.

This is where the right financial professional becomes essential. A contractor may see under-billings as routine, but a surety reads them as signals. A CFO, controller, or construction-focused accountant ensures those signals are strong, clean, and defensible.

What Contract Assets Mean in the Real World

A contract asset appears when your costs and progress are ahead of your billing.

In simple terms:

You completed the work, but the invoice has not caught up yet.

This can happen for normal reasons, but it can also indicate deeper issues. Sureties want clarity, consistency, and proof. Financial professionals make sure that happens by documenting job progress, keeping WIP updated, and preparing billing schedules that show the full picture.

The Questions Sureties Ask—And How a Financial Professional Prepares You

1. Why is the contract asset balance so high?

A large under-billing balance prompts a surety to ask whether your billing process is slow or your job is slipping.

A financial professional:

• Tracks billing deadlines

• Reviews percent-complete calculations

• Ensures pay applications go out on time

• Highlights unusual spikes before the surety sees them

This prevents surprises that could weaken your bonding line.

2. Is the amount collectible?

Sureties want to know if the owner is likely to pay.

• A financial professional:

• Confirms the work is approved

• Ensures documentation supports the amount

• Tracks disputes or change order status

• Communicates any payment risks early

This protects your working capital and credibility.

3. What caused the underbilling?

Not all contract assets are equal. Timing issues are acceptable. Cost problems are not.

A financial professional:

• Reviews job cost reports

• Verifies that costs match production

• Identifies whether costs are rising faster than billing

• Explains the nature of the under-billing to the surety

This clarity is exactly what underwriters want to see.

4. Is billing slow or inconsistent?

Slow billing harms cash flow and creates unnecessary risk.

A financial professional:

• Establishes a billing calendar

• Holds project managers accountable

• Maintains proper revenue recognition

• Ensures billing aligns with contract terms

Underwriters see disciplined billing as a sign of a financially mature contractor.

5. Are margins holding steady?

Under-billings sometimes hide fading margins or errors in job estimates.

A financial professional:

• Reviews job profitability monthly

• Detects margin changes early

• Updates WIP to reflect realistic costs

• Prevents job overruns from being hidden in contract assets

This transparency strengthens financial trust.

6. Are contract assets concentrated in risky jobs?

One job causing most under-billings is a major red flag.

A financial professional:

• Analyzes job-by-job exposure

• Monitors high-risk accounts

• Ensures estimates and costs align

• Communicates risks to management

Sureties value contractors who actively manage risk instead of reacting to it.

7. Are unapproved change orders included?

This is one of the surety’s biggest concerns.

A financial professional:

• Separates approved vs. unapproved change orders

• Documents the status of each CO

• Ensures only valid amounts hit revenue

• Tracks aging of open COs

Sureties often discount unapproved COs, so proper tracking is critical.

8. What does cash flow look like for this job?

Under-billings are closely tied to cash flow stability.

A financial professional:

• Reconciles contract assets to accounts receivable

• Monitors project cash burn

• Ensures billing is keeping up with progress

• Shows cash flow patterns clearly in financial statements

Strong cash flow improves bonding confidence.

9. Are job costs accurate and timely?

Under-billings can indicate poor accounting systems.

A financial professional:

• Posts labor, materials, and equipment costs regularly

• Aligns WIP schedules with the general ledger

• Identifies coding errors

• Ensures job cost accuracy before reports go to the surety

This accuracy is the foundation of a strong balance sheet.

10. Is this a long-term pattern?

Sureties track behavior over time.

• A financial professional:

• Reviews year-over-year trends

• Implements process improvements

• Reduces habitual under-billing

• Presents clean, consistent WIP schedules

This turns contract assets into a normal timing item instead of a warning sign.

Why This Matters for Your Bonding Capacity

Sureties do not expect contractors to eliminate contract assets. They simply want to understand them.

• When your financial professional can clearly explain:

• Why the number exists

• Whether it is collectible

• How it is documented

• How it fits into the job’s progress

• How it impacts cash flow

Your bonding capacity increases, and your projects become easier to support.

Poorly explained contract assets, missing documentation, or sloppy billing habits limit your bond line and raise the surety’s concerns.

How a Financial Professional Protects You

A strong construction-focused financial professional:

• Strengthens job cost reporting

• Prepares accurate WIP schedules

• Builds predictable billing routines

• Improves cash flow stability

• Reduces surprises in your financials

• Speaks the “surety language” when underwriters ask questions

Contractors who invest in this support see clearer financials, fewer bonding questions, and higher capacity for growth.