Surety Bond Quarterly - Winter 2014 - (Page 32)
BY BRIAN POLLACK
The Importance of Cracking the
AlThOUgh ThE CONSTRUCTION industry generally seems to be picking up,
gross profit margins continue to be
tight. These continued tight margins
make it ever so important to have
timely, accurate, monthly financial
statements so the proper business
decisions can be made. Nothing
drives the financial statements for
a contractor more than the calculation of the under and overbillings
on a work-in-progress (WIP) report.
This report allows the financials to
accurately recognize earned revenue
on contracts under the percentage
of completion method. Without this
data on a monthly basis, the financial
statements are not worth the paper
they are printed on. While cash might
still be king in today's business world,
data is its first-born heir. It is this data
that feeds the decision-making processes of a successful business.
What are the benefits of a monthly
* This report will provide the ability
for a quick comparison of actual
results to the budgeted estimates.
* Tracking potential contract profit
fade on a monthly basis will lead
to the ability to make quicker decisions to correct the reasons for
* It will assist in recognizing "earned
revenue" versus "invoiced revenue" each month on the profit-andloss statement.
* The report will assist in cashflow
management job by job as well as
for the overall company by showing
the levels of under and overbillings
at the end of each month.
* The WIP report will assist in the
tracking and processing of change
orders on a quicker basis.
* The WIP report also contains the
gross profit backlog which indicates how much future overhead
is covered by work on hand.
* Bonding - This report is a necessity
when it comes to obtaining, maintaining and potentially increasing
a company's bonding capacity.
Surety companies rely heavily on
this report when evaluating the
bondability of a company.
surety BoNd Quarterly | WINTER 2014
The preparation of a monthly
WIP report benefits all levels of
a company, from the superintendents and project manager to the
accounting department and owners.
These timely reports will assist in
financial operations running more
smoothly and maintaining expected
profit margins. In the end, it will
make it much easier to forecast
future needs and opportunities for
If you have any questions or need
assistance in getting to the level
of preparing a WIP on a monthly
basis, you should contact a knowledgeable and construction-oriented
Brian Pollack, CPA, a partner of the
CPA firm of Lanigan, Ryan, Malcolm
& Doyle, P.C., provides services to
owners of privately owned companies that typically work in the construction, government contracting, or
real estate industry. He can be contacted at firstname.lastname@example.org or
Table of Contents for the Digital Edition of Surety Bond Quarterly - Winter 2014
NASBP Upcoming Meetings
2014-2015 NASBP Executive Committee
From the CEO: Education is everywhere and in everything we do
Practical Insights: What You Need to Know-Lease Accounting, A new standard is coming
Surety Up North
Training the Next Generation of Surety Talent
EJCDC’s New P3 Document
The Top 10 Things Public Owners Should Know About Surety Bonds
What's a Construction Company's Most Valuable Asset?
NASBP Virtual Seminars
New NASBP Resource: Information map of advocacy issues
Meetings in Photos
The Importance of Cracking the “WIP” Monthly
U.S. Customs and Border Protection to Deploy eBond
NASBP Outreach Continues Throughout the Year
Index to Advertisers
Surety Bond Quarterly - Winter 2014