Surety bonding is a financial guarantee used in the construction and contracting industries to ensure contractors fulfill their contractual obligations. A surety bond involves three main parties and provides security for project owners and stakeholders. 1. Key Parties in a Surety Bond 2. Types of Surety Bonds 3. How Surety Bonds Work 4. Benefits of Surety Bonding 5. Surety Bonding vs. Insurance Conclusion Surety bonding is a vital tool for contractors… Read More
Why Contractors Need To Be Licensed And Bonded
Contractors are often required to be licensed and bonded to comply with regulations, protect clients, and establish trust in their professional abilities. Here’s a detailed look at why these requirements are essential: 1. Licensing Licensing ensures contractors meet specific qualifications and standards set by state or local governments. 2. Bonding Bonding provides financial protection for clients in case contractors fail to fulfill their obligations. Benefits of Being Licensed and Bonded Conclusion Being… Read More
Construction Job Costing | Balancing Budget, Prices, and Cash Flow
Job costing is essential to any business’ bottom line, but it’s especially crucial in the construction industry. The ability to effectively and accurately estimate your job costs on a project can set you up for success or put you on a course for disaster. What is job costing? Job costing is a method of calculating the actual costs of working on a construction project. It takes the overall project and… Read More
Front Loading a Schedule of Values | Risks of Gambling with Cash Flow
Cash is king in construction. Being able to effectively maintain cash flow throughout the project is vital to successfully completing a job. Sometimes this takes some creative maneuvering. One way this is accomplished is through the controversial, but common, practice of front loading a schedule of values. Schedule of values recap A schedule of values is a list of work items representing the entire construction project from start to finish…. Read More
Key Ratios For Contractors and Underwriters
Cash greater than 5% of annual revenue (non-borrowed): Contractors should maintain an available bank line of credit of at ‘least 5% of annual revenues; in addition, cash as reported on the contractor’s annual financial statements must exceed overbillings, with any differences maintained or tracked through accounts receivable. Tangibility equity greater than 15% of annual revenue-Stated equity as reported on a contractor’s financial statements is adjusted to remove goodwill, related-party receivables,… Read More
Why Does Accounting Feel Like a Necessary Evil for Contractors?
Accounting is the backbone of any business, ensuring smooth financial operations and compliance with regulations. However, for contractors juggling multiple projects and responsibilities, it can feel more like a “necessary evil” than a helpful tool. This article delves into the reasons behind this perception and offers solutions to turn accounting into a manageable and even rewarding aspect of a contractor’s business. Understanding the Role of Accounting for Contractors The Dual… Read More