Your bonding capacity depends on how reliable your financial statements are, and those statements are only as good as the payroll and job cost data underneath them. Hours on the wrong job make your WIP report drift, and the surety backs less work.
Bonding capacity is the total amount of bonded work a surety will support for a contractor. Sureties set it by reviewing working capital, equity, profit, the WIP schedule, and the quality of the financial statements. Payroll and job costing feed every one of those numbers.
That was the message of eBacon's webinar, Bad Data: How to Get Payroll, Job Costing, and Bonding on the Same Page, with surety broker Matt Snowden of The Mahoney Group, fractional CFO Josh Luebker of SPM The Construction CFO, and eBacon GL expert Bernadette "Dette" Negrete.
The biggest myths treat bonding as a cash problem instead of a data problem.
Cash basis statements are almost unusable for most bond requests. Accrual is better, and percentage-of-completion is stronger. As a round-number rule of thumb, Matt said a dollar of profit should support about $10 of bonding capacity. That is why a $100,000 tax write-down can cost you a million dollars of work.
Each step up gives the underwriter more confidence to stretch.
| Statement level | Who prepares it | What it tells the underwriter |
|---|---|---|
| Internal statements | Owner or office staff | No outside check on the data. |
| Internal with a CFO or controller | A trained accountant on staff or a fractional CFO | A trained accountant handled the entries. |
| CPA compilation | A CPA formats management's numbers | No assurance on accuracy. |
| CPA review | A CPA tests whether the numbers make sense | Limited assurance backed by a licensed CPA's signature. |
| CPA audit | A CPA tests the numbers in depth | The highest level of assurance, though not a guarantee. |
Bad payroll data usually starts with hours charged to the wrong job. The person processing payroll may not know where each worker was that week, so time gets entered under whatever job seems right. Even if the worker gets the correct rate, the cost lands on the wrong project and the WIP report tells the wrong story.
eBacon has crews clock into the specific job and task from the field, uses geofencing to block clock-ins outside the job site's range, and uses that job and task to set the correct prevailing wage rate.
Miss your lien waivers or certified payroll reports, and a GC may hold your pay app.
You fix it by tracking labor by job, updating your WIP monthly, and keeping profit in the company.
Your next bond request starts with the payroll data your crews generate every week. "Bonding capacity is a result, but it's a chosen result," Josh said.
The eBacon Certified Payroll product page shows how the same job and task time data that sets prevailing wage rates also feeds certified payroll reporting and job costing. Pair that data with a trusted CFO or CPA and a surety specialist. As Matt put it, "You don't win for being first. You win for being accurate."
eBacon is the only construction-focused platform featuring certified payroll with a money-saving fringe trust. All-in-one software with scheduling, GPS-enabled time tracking, safety system, and inventory management for contractors with 15 to 500 employees.
Book an eBacon product tour to see how labor costs get allocated to jobs from the moment a crew clocks in. The tour covers job and task clock-ins, geofencing, prevailing wage rates, and certified payroll reporting.
It depends on your working capital, equity, profit, and the quality of your financial statements. As a round-number rule of thumb from the webinar, a dollar of profit can support about $10 of bonding capacity, and working capital near one-tenth of the job size is a common starting check. Every surety sets its own limits, so talk with a surety specialist about your numbers.
Most contractors do not need a CPA audit to get bonded. Many can work with a CPA review, and smaller bonds may only need internally prepared statements. Larger bond programs, or a lender's requirements, may call for an audit.
Yes, most WIP reports follow a similar spreadsheet format. They track contract value, cost to date, estimated cost to complete, billings, overbilling, underbilling, and percent complete based on cost. Ask your surety if it prefers a specific format.
According to the panel, contractors most often fail when they take on work outside their technical or geographic expertise, chase jobs more than twice the size of their largest profitable job, or keep poor records. Matt pointed to the book Managing the Profitable Construction Business for a deeper look.
The SBA's Surety Bond Guarantee Program may help. The SBA guarantees bid, performance, and payment bonds issued by certain surety companies, which lets them bond small businesses that might not meet other sureties' criteria. You apply through an SBA-authorized surety agency.