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TIPS TO IMPROVE YOUR BONDING PROGRAM:

- TIP - APPOINT A PROFESSIONAL CONTRACT BOND ONLY AGENT/BROKER - The BOND CONNECTION represents the best interests of General Contractors and Subcontractors of all sizes and trades using it's direct appointments to numerous surety bond companies, underwriters and programs. Only by "in-house" execution of all bid, performance and payment bonds can a contractor receive the SERVICE needed to GROW REVENUE AND PROFIT. Insurance agents do not have the necessary special and unique experience and only minimal indirect access to 1-2 inferior/inappropriate sources.
Don't find out the hard way your agent is not the best source of servicing your bond needs.

* CLICK FOR FURTHER REASONS WHY TO CHOOSE BOND CONNECTION
-TIP - IMPROVE/MAINTAIN GOOD CREDIT RECORD - Surety bond companies periodically check a variety of credit reporting sources and question irregularities. Trade payments shoud be kept current. Pull company & company ownership credit records regularly. Report errors for correction immediately.

- TIP - IMPROVE COMPANY FINANCIAL PRESENTATION - Type and method of presenting a company's financial strengths frequently assists a company's overall objectives. Larger bonds & lower premium requirements result. Employ a Certified Public Accountant, (CPA), to put together a financial statement for your company. If you already have a CPA financial statement, consider upgrading it's quality. In order of sophistication, CPA's compile, review or audit the financial positions of companies, the latter not needed except by the largest of companies. An active construction company will have significant value in ongoing construction projects. Valuation of that incomplete work is most accurately expressed in the "percentage of completion" method of accounting. By presenting that usually increased valuation on even a mere compiled financial statement, (which is allowed to be calculated seperately from more conservative tax methods), a contractor's bonding capacity will increase. Providing a financial statement at least "compiled" by a CPA is a less expensive way to increasing bonding capacity without breaking your budget.[/size]

* CLICK TO OPEN/VIEW A SAMPLE CPA "COMPILED" QUALITY FINANCIAL STATEMENT PREPARED ON A PERCENTAGE OF COMPLETION METHOD OF ACCOUNTING THAT IS "BOND COMPANY FRIENDLY". (ALTHOUGH THIS EXAMPLE MAY BE FAR MORE SOPHISTICATED THAN NECESSARY FOR YOUR COMPANY, A GOOD CPA WILL STILL WELCOME IT AS A USEFUL TEMPLATE. (Adobe .pdf format)
A contractor's CPA using the format in the sample above is recommended compared to the immediate below sample which is acceptable but of inferior quality. That acceptability depends upon a contractor's individual qualifications and needs.
* CLICK TO OPEN/VIEW ANOTHER SAMPLE CPA "COMPILED" FINANCIAL STATEMENT. IN COMPARING THE TWO PRESENTATIONS, IT'S OF LESSER YET USEFUL QUALITY (Adobe .pdf format)
However, if your company desires bonding projects larger than $750,000 in size or larger, improving your company's presentation to a quality "review" financial statement to document your company's financial qualifications is sometimes required by underwriting companies.

You can also benefit from comparing it to this recommended example:
* CLICK TO OPEN/VIEW A SAMPLE CPA "REVIEW" QUALITY FINANCIAL STATEMENT PREPARED ON A PERCENTAGE OF COMPLETION METHOD OF ACCOUNTING THAT IS "BOND COMPANY FRIENDLY". (Adobe .pdf format)
Note: Bond companies most value a contractor's latest fiscal year-ending financial statement over some more current point in time.

However, before you go to any significant expense and make such an investment, we do recommend you first send us what you have to receive our opinion.

Here's another example:
* CLICK TO OPEN/VIEW ANOTHER SAMPLE CPA "REVIEW" QUALITY FINANCIAL STATEMENT PREPARED ON A PERCENTAGE OF COMPLETION METHOD OF ACCOUNTING ALSO "BOND COMPANY FRIENDLY". ALTHOUGH THIS EXAMPLE MAY BE FAR MORE SOPHISTICATED THAN NECESSARY FOR YOUR COMPANY, A GOOD CPA WILL STILL WELCOME THESE USEFUL (ALBEIT DATED) TEMPLATES. (Adobe .pdf format)
Note: Bond companies most value a contractor's latest fiscal year-ending financial statement over some more current point in time. If significant time has passed since year-end, an update is additionally recommended. Such an update can be made with very minimal confidence by a CPA or even just an "in-house" presentation by the contractor. If extreme significant financial progress has progressed since year-end, then it may be a subjective cost versus benefit equation best determined by discussing in an conference setting. ("Cost" being what the contractor may choose to spend engaging a CPA to improve a mid-year presentation; the "benefit" being how much additional bonding may result).

- TIP - MAXIMIZE CASH - Cash is king, now more than ever. A contractor with a strong net cash position may be able to fund problems without turning to third parties, e.g., the surety or others. The larger a contractor's cash position at reporting periods, the more favorably a bond company looks upon that contractor's qualifications.

- TIP - MAXIMIZE WORKING CAPITAL AT REPORTING PERIODS - This means maximize available liquid assets while minimizing current liabilities. Restructure any debt if possible.

- TIP - MAXIMIZE BORROWING CAPACITY AND/OR AVAILABILITY WITH LENDING INSTITUTIONS - "Wine and dine" all banks, bond companies and other large creditors. The more capabilities available at one, the more others favorably view a contractor.

- TIP - PLACE RISK EXPOSURE TO APPROPRIATE PARTY - Requiring larger subcontractors and suppliers provide bonds reduces both the contractor and bond company's exposure, freeing up bonding capacity for another project.

- TIP - REDUCE AND/OR ELIMINATE PROJECT UNDERBILLINGS - Whenever possible, especially at company fiscal year-end and other reporting periods. Surety bond companies would rather contractors utilize payments instead of a contractor's working capital.

- TIP - INCREASE LIFE INSURANCE OF OWNERS - Surety bond companies value a properly funded plan that considers every possibility and increases money available in all possible scenarios.

- TIP - LETTERS OF RECOMMENDATION/REFERENCE LETTERS - Experience is a key factor and bond companies can only recognize a contractor's by verifying successfully completed projects. Get a reference letter on large &/or more complicated jobs.

- TIP - INDIVIDUAL & COMPANY RESUMES - Resumes document all technical knowledge and experience available from owners & key employees. Marketing flyers, pamphlets, pre-qualification statements etc. record organizational accomplishments too.

- TIP - ADDITIONAL CAPITAL INVESTMENT - Financial resources is a increasingly important factor on the validity of your enterprise. Where a CPA might recommend profit minimization valuing your desires for tax objectives, bond companies advocate the opposite and prefer owners leave as much money in their company as possible.

* CLICK FOR A GENERAL OVERVIEW OF THE PROCESS, FROM PREQUALIFICATION TO MAINTAINING AN ONGOING STRONG BOND CAPACITY.

WHY CONTRACTORS FAIL: The top reasons contractors fail are, in order:

OVER EXPANSION -
Growing too fast, over extending financial and personnel resources.
Recomendation: Adopt and commit to a written logical rational sustainable business plan.

VOLUME OBSESSION -

More profit does not necessarily derive from more revenue.
Recommendation: Do not accept lower profit margins from larger or "filler" jobs.

SINGLE PROJECT EMPHASIS, UNREALISTIC SCHEDULES, UNFAIR OR POORLY DRAFTED CONTRACTS -
A single bad project has the potential to bring down an otherwise healthy concern including timing, selection, and other issues both available and unknown at it's inception.
Recommendation: Adopt a strategy for more jobs of smaller size.

FLAWED ACCOUNTING SYSTEMS LEADING TO MANAGEMENT ERRORS IN CAPITAL ALLOCATION -
Contractors who have yet to adopt, understand or properly calculate their financial position on a "percentage of completion" method of accounting are unable to understand their own strenghts and weaknesses. Often, a major part of a contractor's value resides in their work in progress.
Recommendation: Adopt a "percentage of completion" method of accounting into all facets of financial reporting systems, religiously monitor and adjust incomplete job estimates.

Additional reasons: POOR FINANCIAL, MARKETING AND MANAGEMENT CAPABILITIES; ABSENCE OF OR POOR SUCCESSION PLANS; POOR PROJECT MANAGEMENT & PERFORMANCE; PROBLEM CUSTOMERS; MARKET VOLATILITY AND CHANGES.

* source; FMI, a construction consulting firm based in Raleight, N.C. in conjunction with the Construction Users Roundtable


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