Your Underwriter Says You Want a CPA-Ready Assertion. What Now? Half I

This put up is a part of a sequence sponsored by Previous Republic Surety.

Many industrial contractors have skilled the stress brought on by the surety requiring them to acquire a monetary assertion ready by a licensed public accountant (CPA). Typically that is triggered by a big undertaking alternative. Confronted with the potential for dropping a undertaking, it turns into a mad sprint, which can lead the contractor to decide on an accountant with the quickest turnaround time and who causes the least quantity of trouble. Nevertheless, development accounting is exclusive, and an accountant who is just not accustomed to its complexities may subject a press release with out the wanted schedules, with a steadiness sheet and earnings assertion that don’t appropriately tie into the schedules, or any variety of different errors rendering it unusable for the surety underwriter. At this level the contractor has spent useful time, to not point out hundreds of {dollars}, for the assertion, however everyone seems to be again at sq. one, or worse, the bond is declined.

Understanding the anticipated time and capital funding, in addition to the position of a CPA in getting ready compiled, reviewed or audited statements, is crucial to make sure a contractor will get a robust monetary presentation, not just for the surety, but in addition to make the most of for their very own inside controls. Halli Williams, CPA, CCIFP, Senior Supervisor for CBIZ CPAs, P.C., and Kelly Kimmel, Contract Bond Supervisor for the Kansas Metropolis department at Previous Republic Surety Firm collaborated on answering the incessantly requested questions that many corporations have when seeking to interact an exterior CPA for getting ready a monetary assertion to assist their surety program.

Why does my surety care about my monetary statements?

Monetary evaluation is on the base of contract surety bond underwriting. A powerful CPA-prepared monetary assertion will do a number of issues:

Assist make sure the accuracy of the knowledge offered,
Standardize monetary shows in accordance with GAAP [Generally Accepted Accounting Principles], and
Present schedules and breakdowns of firm monetary info displaying essential particulars on how profitability and cash flows by means of the corporate.

A powerful monetary presentation is a major issue the surety makes use of when confirming that an organization’s character, capability and capital align with their underwriting urge for food. It could possibly additionally help within the surety’s potential to stretch a contractor’s bonding credit score.

How do I select a CPA?

Legally, any CPA can interact in offering a reviewed assertion even when they’ve by no means ready a cost-to-cost (beforehand known as proportion of completion) assertion earlier than, as long as, in accordance with compliance guidelines, they intend on acquiring the information wanted to supply an ample assertion.

Nevertheless, the accountant you’ve all the time used to your taxes could not all the time be your only option when partaking a CPA for a GAAP-complying monetary year-end assertion. Each GAAP requirements and the tax codes are complicated, and it’s tough to be an professional in a single, not to mention each. Typically, it’s best observe to have separate specialists for every service, to make sure each your monetary assertion and taxes are assembly the proper, newest necessities.

The next are just a few strategies for finding a construction-oriented CPA:

Contact your present accountant or monetary adviser. CPA companies normally have separate departments for every service. They are able to collaborate on gathering monetary info, lessening the quantity of double work that could be required in finishing each a year-end GAAP monetary assertion and a tax return. Be aware in your communication so you possibly can be sure that the advisable accountant has the {qualifications} and expertise required for each companies.
Request suggestions out of your surety agent or underwriter. Typically these shall be your finish customers of the assertion and subsequently they’ve a good suggestion of what they’re desirous to see and examples of accounting companies which have offered different shoppers with acceptable statements previously.
Go to the CFMA Web site’s Service Supplier Listing. CFMA (Development Monetary Administration Affiliation) is a construction-oriented accounting group. The CPA companies which are lively within the CFMA neighborhood are typically skilled in offering monetary statements utilized by contractors to assist their surety program.
Ask trusted friends within the business. Ballot different professionals inside the business on the CPA companies that they use and what their expertise has been. Additionally ask concerning the suggestions they’ve obtained from their surety corporations on the statements.

What questions ought to I ask the CPA?

Upon getting narrowed down your search, be sure to select the correct associate by asking the correct questions. The next are some examples of questions that will aid you higher qualify your CPA:

General development accounting information
- Do you incessantly carry out development accounting companies?
- Are statements ready by people or a group of accounting professionals?
- Do the people engaged on accounts change from 12 months to 12 months?
- How does your agency guarantee that you’re updated on the newest GAAP requirements?
- What’s the oversight course of to make sure that GAAP requirements are met when issuing a press release?
Tailor-made experience
- Are you able to present a high-level description of the kind of development and area’s that your shoppers work in?
- What’s the measurement of the most important contractor you’re employed with?
- What income vary do most of your contractors fall into?
- Have you ever labored with my scope of labor and firm measurement?
- Is your expertise on this space intensive?
- Have you ever labored with my software program methods earlier than?
- What has your expertise been with these methods?
Asset to your agency
- Do you present perception and experience to your shoppers on what challenges and alternatives others within the business are experiencing primarily based in your observations?
- Are you able to present benchmarking or perception into how our firm metrics examine with others within the business?
- Do you supply greatest observe recommendations when observing our firm’s inside controls?
- What challenges have you ever discovered that related corporations skilled when partaking a CPA?
- What helped them overcome these challenges?