It is a faithful old saying that “What you can measure, you can manage”. That truth spurs us all to be sure we can measure the important numbers dear to us like job cost, overhead expense, revenues and the like. Often, the quality of our measuring tools determines the quality of our management. Measuring past events helps us to set scorecards and benchmarks for future decisions.
The major measuring tool used by bonding companies to find out what happened is the annual CPA prepared financial statement. Properly understood, a good CPA statement can sometimes tell a story as interesting as a good novel about the annual life of a small business. A quality fiscal year-end CPA statement creates a sense of security and comfort for a bonding company. Indeed, almost all bonding decisions are primarily based on this CPA statement.
But the CPA statement is not so good at telling what’s happening. Since your year-end, have you been making money? How much? What’s changed? If you’re considering a big job in the future, what’s going to happen to your business from now until the time that job starts? Work on hand schedules and interim in-house statements can be helpful here. They can help bridge the gap and give your bonding company the information they need to stretch out. Sometimes, even these are not adequate. Sometimes you need to visit with a trusted bonding professional, share your story, and brainstorm together to find solutions.
Recently, we visited with a contractor and determined that he didn’t have a problem that a $100,000 cash infusion couldn’t solve for his upcoming stretch in work program. The contractor laughed and said he couldn’t get the $100,000. Yet, when we looked at what’s happening, and what’s going to happen, we determined that, indeed, he would earn his $100,000 before the stretch started. Thus, this contractor was not held back by historical data, but could move ahead with his bonds. He received his bonds because his bonding team could look ahead to what’s going to happen.