How Does WIP Reporting Affect Bonding Capacity?

By Martin · Updated 2026-02-02

Sureties rely heavily on WIP reports to assess your risk profile and determine bonding capacity. Contractors with accurate, timely WIP reporting — showing controlled margins, minimal overbilling, and no hidden problems — can often secure 2-3x higher bonding capacity than contractors with poor or infrequent WIP discipline.

Why This Matters

Your bonding capacity determines how much work you can take on. A surety underwrites bonds based on four factors: working capital, net worth, backlog, and the quality of your WIP reporting. The first three are balance sheet numbers. The fourth — WIP reporting — is where you have the most control and where most contractors leave money on the table.

I've worked with contractors who had $5M in working capital but could only get bonded for $8M in work because their WIP was a mess — inconsistent margins, problem jobs buried in the schedule, overbilling at 40%. I've also worked with contractors with $3M in working capital who got bonded for $15M because their WIP was clean, timely, and showed no surprises.

Sureties are in the business of managing risk. A clean WIP report tells them you know your numbers, you manage projects tightly, and you're not hiding problems. A messy WIP report — or worse, no WIP at all — tells them you're flying blind.

What Sureties Look For

When a surety reviews your WIP, they're scanning for red flags. Here's what makes them nervous:

Jobs over 80% complete still showing gross profit. If a job is 95% complete and you're still showing 10% margin, either you front-loaded costs (good) or you're ignoring cost overruns (bad). Sureties assume the worst until you prove otherwise.

Flip-flop margins. A job that's 30% complete showing 12% margin, then 50% complete showing 8% margin, then 70% complete showing 11% margin. This tells the surety you're guessing, not tracking. Margins should tighten over time, not bounce around.

Excessive overbilling. If your total overbilling is $800K and your working capital is $2M, you've borrowed 40% of your liquidity from future earnings. Sureties see this as cash flow risk. If those jobs hit problems, you've got no cushion.

Growing underbilling. Underbilling of $50K per job is normal. Underbilling of $300K on a $2M job means you're way ahead on costs or way behind on billing. Either one is a problem.

Problem jobs without adjustments. A job that's 60% complete with costs at 75% should show a margin adjustment. If your WIP still shows the original estimated margin, the surety knows you're not adjusting estimates — which means they can't trust any of your numbers.

How to Present Your WIP to Maximize Capacity

A surety-ready WIP report has these characteristics:

Consistency. Run your WIP monthly, on the same date, using the same method (percent-complete or completed-contract). If you skip months or change methods, it raises questions.

Conservative billing practices. Overbilling should be minimal — ideally under 10% of working capital. If you've got $3M in working capital, keep total overbilling under $300K. This shows discipline and reduces perceived cash flow risk.

Margin stability. Margins should narrow as jobs progress, not swing wildly. A job that starts at 10% estimated margin and finishes at 9% actual margin is perfect. A job that starts at 10% and shows 14% at midpoint raises eyebrows — did you lowball costs, or is the owner going to dispute your billing?

Documented adjustments. If a job goes sideways, adjust the estimate at completion immediately and document why. Sureties respect transparency. A note that says "adjusted EAC by $75K due to rejected CO #4 and weather delays" is far better than pretending the job is still on track.

No surprises. The worst thing you can do is hide a problem job until it's too late. If a job is bleeding margin, show it on the WIP. Sureties will work with you on a problem job if you're managing it proactively. They'll cut your capacity if they find out you've been hiding it.

The Bottom Line

Bonding capacity isn't just about your balance sheet — it's about trust. A clean, accurate WIP report builds trust with your surety, and trust translates to capacity. I've seen contractors increase their bonding capacity by 50% just by tightening their WIP discipline — no change to working capital or net worth, just better reporting.

If you want to grow, start with your WIP. Run it monthly, adjust estimates when jobs hit problems, keep overbilling in check, and never hide bad news. Sureties reward contractors who manage their numbers tightly. They penalize contractors who guess.