This put up is a part of a collection sponsored by Previous Republic Surety.
Many business contractors have skilled the stress brought on by the surety requiring them to acquire a monetary assertion ready by an authorized public accountant (CPA). Typically that is triggered by a big venture alternative. Confronted with the potential of dropping a venture, 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 problem. Nonetheless, development accounting is exclusive, and an accountant who just isn’t aware of its complexities may concern an announcement with out the wanted schedules, with a stability sheet and revenue assertion that don’t accurately 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 function 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 robust CPA-prepared monetary assertion will do a number of issues:
- Assist make sure the accuracy of the data supplied,
- Standardize monetary displays in accordance with GAAP [Generally Accepted Accounting Principles], and
- Present schedules and breakdowns of firm monetary data displaying vital particulars on how profitability and cash flows by the corporate.
A robust 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 will possibly additionally help within the surety’s skill 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 share of completion) assertion earlier than, as long as, in keeping with compliance guidelines, they intend on acquiring the information wanted to supply an satisfactory assertion.
Nonetheless, the accountant you may have all the time used on your taxes might not all the time be the best choice when participating a CPA for a GAAP-complying monetary year-end assertion. Each GAAP requirements and the tax codes are advanced, and it’s tough to be an skilled in a single, not to mention each. Usually, it’s best observe to have separate consultants 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 can collaborate on gathering monetary data, lessening the quantity of double work which may 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 really helpful accountant has the {qualifications} and expertise required for each providers.
- Request suggestions out of your surety agent or underwriter. Typically these can be your finish customers of the assertion and subsequently they’ve a good suggestion of what they’re eager to see and examples of accounting companies which have supplied different purchasers with acceptable statements up to now.
- Go to the CFMA Web site’s Service Supplier Listing. CFMA (Building Monetary Administration Affiliation) is a construction-oriented accounting group. The CPA companies which might be 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 trade. Ballot different professionals inside the trade 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?
After getting narrowed down your search, be sure you select the precise companion by asking the precise questions. The next are some examples of questions that will make it easier to higher qualify your CPA:
- General development accounting information
- Do you incessantly carry out development accounting providers?
- Are statements ready by people or a workforce 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 latest GAAP requirements?
- What’s the oversight course of to make sure that GAAP requirements are met when issuing an announcement?
- Tailor-made experience
- Are you able to present a high-level description of the kind of development and area’s that your purchasers work in?
- What’s the measurement of the biggest 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 in depth?
- Have you ever labored with my software program techniques earlier than?
- What has your expertise been with these techniques?
- Asset to your agency
- Do you present perception and experience to your purchasers on what challenges and alternatives others within the trade are experiencing based mostly in your observations?
- Are you able to present benchmarking or perception into how our firm metrics evaluate with others within the trade?
- Do you provide finest observe solutions when observing our firm’s inside controls?
- What challenges have you ever discovered that comparable corporations skilled when participating a CPA?
- What helped them overcome these challenges?
Proceed studying:
Half 2 of three
Half 3 of three
Co-written with Halli Williams, CPA, CCIFP, Senior Supervisor for CBIZ CPAs, P.C.
This weblog was initially revealed on the Previous Republic Surety web site. It’s reproduced right here with permission.
Assets
https://www.ispartnersllc.com/weblog/five-types-testing-methods-used-audits/
https://us.aicpa.org/content material/dam/aicpa/analysis/requirements/compilationreview/downloadabledocuments/ar-00090.pdf
https://www.procore.com/library/construction-financial-audit
https://us.aicpa.org/content material/dam/aicpa/analysis/requirements/auditattest/downloadabledocuments/au-00326.pdf
https://us.aicpa.org/content material/dam/aicpa/analysis/requirements/auditattest/downloadabledocuments/au-c-00300.pdf
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