What is a Claim?

A surety in construction is a company that provides financial guarantees, typically in the form of bonds, to ensure that contractors fulfill their contractual obligations. The surety acts as a third-party guarantor, promising to step in and complete the work or compensate for damages if the contractor fails to meet their commitments.

Sureties issue various types of construction bonds, including bid bonds, performance bonds, and payment bonds. These bonds protect project owners from financial loss and give them confidence that contractors can deliver on their promises. To obtain bonding, contractors must demonstrate financial stability, technical expertise, and a track record of successful project completion.

For subcontractors, working with bonded general contractors provides payment protection, but maintaining your own bonding capacity is equally important for winning larger projects. Sureties evaluate contractors based on several factors, including financial health, project experience, and accounts receivable aging. Since poor A/R management can hurt your bonding capacity and disqualify you from major projects, keeping payments flowing quickly becomes critical for more than just cash flow.

Siteline helps subcontractors maintain healthier A/R aging by streamlining billing processes, providing visibility into payment statuses, and creating automated reminders to stay on top of collections. This all positively impact bonding evaluations and keep more opportunities within reach. Learn more about Siteline.

A Chart of Accounts (COA) in the construction industry is essentially a financial organizational tool that provides a complete listing of every account in an accounting system. These accounts are typically used to categorize financial transactions that a business has to deal with to conduct its everyday operations. In construction, the COA may include accounts such as materials, labor costs, subcontractor fees, overhead expenses, equipment costs, and liabilities. Different project types will often require different charts of accounts. Furthermore, the COA assists in organizing the company's finances and ensuring accurate financial reporting, it's also important for identifying the total costs of a construction job, tracking profit margins, and analyzing expenses. It's a critical tool in managing a construction company's finances.

Billings in excess of costs (also called overbillings) occur when you’ve invoiced your client for more work than you’ve actually completed or incurred costs for. In other words, it represents getting paid ahead of your work schedule.

Here’s how it works: If you’re a concrete subcontractor on a $100,000 job and you bill 50% upfront ($50,000) but have only completed $30,000 worth of work, that $20,000 difference is your billings in excess of costs. You owe your client that work, and until you complete it, that $20,000 remains as a liability on your balance sheet.

For subcontractors, understanding billing in excess of costs is essential because it can be a strategic cash flow tool when used carefully. For example, when bidding on a job, you can be smart about how you structure your schedule of values (SOV)—breaking work down into more detailed line items that allow earlier billing. However, this strategy requires regular monitoring to ensure:

• Your billing somewhat aligns with your actual percentage complete, and 
• The remaining contract value will still cover your remaining costs.

The biggest risk of overbilling is thinking your margins look better than they are, simply because you’re collecting cash faster. Surety companies and lenders also scrutinize overbillings closely, as excessive amounts can signal poor project management or potential cash flow problems down the road.

With Siteline, you can easily track whether you’re billing in excess of your costs by pulling your month-to-month incurred costs and comparing them against your billing progress. This real-time visibility helps ensure you’re billing appropriately while maintaining realistic profitability expectations. If you’re interested in seeing for yourself, schedule a personalized demo of Siteline here.