Cash vs. Accrual Basis

[Bond Magician]

I am trying to apply for a performance bond. I have heard from many Surety companies that they can not approve this type of bond if the financials are on a cash basis, only on an accrual basis. Why is this?

[Surety Queen]

Originally Posted by Bond Magician

I am trying to apply for a performance bond. I have heard from many Surety companies that they can not approve this type of bond if the financials are on a cash basis, only on an accrual basis. Why is this?

When financials are done on a cash basis, they don't show sales until they have been billed and paid for so there is no accounts receivable.

Accrual allows for receivables to show as a current asset which can strongly impact the strength of the financials and is absolutely required for contract bonding.