United States
Hong KongFinancial statements and net worth
Most states require financial statements supporting a net worth or working capital threshold, often scaled to the value of work you may bid. Many require preparation or review by a licensed accountant.
The requirement people underestimate, both in what it asks and in how long it takes.
Why boards ask for it
Because an undercapitalized contractor is a risk. A firm that runs out of money mid-project leaves an unfinished building and unpaid trades, and the board is the only party positioned to check beforehand.
The financial requirement is consumer protection wearing an accounting costume.
What they look at
| Measure | What it shows |
|---|---|
| Net worth | Assets less liabilities - the cushion |
| Working capital | Current assets less current liabilities - short-term capacity |
| Current ratio | Whether near-term obligations can be met |
| Reviewed or audited status | How much independent verification stands behind the numbers |
A state permitting unlimited bidding will want far more evidence than one issuing a limited license. Establish which bracket you need before commissioning statements, because preparing them twice is expensive.
Reviewed, compiled or audited
Three levels of accountant involvement, increasing in cost and in the assurance they provide. States specify which they will accept, sometimes by license class.
A compilation is cheapest and carries least assurance. An audit costs most and persuades most. Pick by what the state accepts.
How long it takes
Weeks. Longer at a busy time of year for accountants. Start it while you are studying rather than after you pass, because the alternative is waiting.
Candidates routinely finish the exam and then wait a month for statements they could have had ready.
Common questions
Why do states want financial statements?
Because an undercapitalized contractor leaves unfinished buildings and unpaid subcontractors. It is consumer protection.
What do boards look at?
Net worth, working capital, the current ratio, and how much independent verification stands behind the figures.
Does the threshold vary?
Usually with the value of work the license permits, so establish your bracket before commissioning statements.
What is the difference between compiled, reviewed and audited?
Increasing levels of accountant involvement, cost and assurance. States specify what they accept.
How long does it take?
Weeks, longer in a busy season. Start during exam preparation rather than after passing.