Construction-Oriented CPA Plays Key Role for Contractors

This post is part of a series sponsored by Old Republic Surety.

If you’re an independent agent with construction contractor clients, here’s an article to share with them about accounting best practices. When your contractor client requests your help — as surety companies recommend that they do — be prepared with both bonding and accounting advice.

We often hear contractors say that getting a job is the hard part — completing the project is the easy part. Many factors go into that, one of which is having proper accounting in place.

Whether it’s pricing a job, financing new equipment or meeting payroll, a construction company must understand its numbers to be successful. Proper accounting is an essential management tool that can’t be overlooked. Contractors need solid financial reporting to accurately track expenses, recognize revenue and manage their cash flow.

Your accounting needs probably were fairly simple when you started your business. You might have run your company strictly on a cash basis. As the firm expanded, you likely moved to a form of accrual accounting.

As you seek larger and more complex projects, you may need a construction-oriented CPA to help you switch to the percentage-of-completion method, which recognizes revenue and expenses based on the percentage of a job you’ve completed. With a percentage-of-completion statement, and accompanying notes and financials, you’ll be in a position to obtain needed surety credit for larger projects.

Working with a good construction-oriented CPA firm puts you ahead of the game — and primed to get larger surety bonds approved when you need them. Here are five reasons why you should hire a CPA firm with construction experience to help you grow your firm:

Rules governing revenue recognition (ASC 606) changed recently, making it critical that you find a CPA firm experienced in construction accounting. A good construction CPA should be able to explain how the new rules will impact your financial statements, including work-in-progress statements and liquidated damages. Ask your agent or Old Republic branch office for a recommendation. They should know CPA firms in your area with a reputation for doing solid work and providing accurate statements that conform to surety underwriting standards.

Ready to take your business to the next level? Partnering with a CPA firm with construction experience is a smart first step. The earlier you begin to upgrade your financial house, the better prepared you’ll be for future growth and success.

If you would like more information about having a trusted adviser, WIP schedules, using a construction oriented CPA or anything else related to surety bonding, please check out the Old Republic Surety contract bond video series.