Tennessee Contractors: Reviewed Financial Statements

Are you a contractor in Tennessee looking to obtain or renew your license? You might have stumbled upon the requirement for "reviewed financial statements” and have some questions. Don't worry, you're not alone! This blog post will share what you need to know about reviewed financial statements for Tennessee contractors.

Why Reviewed Financial Statements?

The Tennessee Department of Commerce and Insurance (TDCI) uses reviewed financial statements to assess the financial health of your contracting business. This helps them determine your monetary limit, which essentially defines the size and value of projects you can undertake.

Reviewed vs. Audited: What's the Difference?

Both reviewed and audited financial statements provide a snapshot of your business's financial position. However, they differ in the level of assurance they offer.

• Reviewed Financial Statements: A Certified Public Accountant (CPA) conducts limited procedures to review your financial statements for accuracy and consistency with accounting standards. They issue a report expressing limited assurance that there are no material misstatements.

• Audited Financial Statements: A CPA performs a more in-depth examination of your financial records, including testing transactions and balances. They provide a higher level of assurance on the accuracy of your financial statements.

Do I Need a Reviewed Financial Statement?

The requirement for reviewed financial statements depends on your desired monetary limit and whether you’re applying for a new license or renewing a license.

New License Applications

New Tennessee contractor licenses with a monetary limit of less than $3,000,000 require a reviewed financial statement prepared by a Certified Public Accountant. If your contractor license has a monetary limit of over $3,000,000, you'll need an audit conducted by a CPA.

License Renewals

As of April 9, 2024, HB 1903 requires Tennessee contractor license renewals with a monetary limit over $1,500,000 to include a compilation by a Certified Public Accountant. Compilations provide no assurance or opinion on the financial statements.

Contractors renewing a license with a monetary limit of less than $1,500,000 can provide notarized internal financial statements. However, the board reserves the right to require reviewed or audited financial statements from any applicant if they deem it necessary.

Monetary Limit Changes

Applications for monetary limit increases less than $3,000,000 require a reviewed financial statement, whereas monetary limit increases over $3,000,000 require an audit.

What Should My Reviewed Financial Statement Include?

Your reviewed financial statement should typically include the following:

• Balance Sheet: This provides a breakdown of your assets (what you own), liabilities (what you owe), and owner's equity (the net worth of your business) at a specific point in time.

• Income Statement: This shows your revenue, expenses, and net income (profit) over a specific period.

• Statement of Cash Flows: This details the movement of cash in and out of your business during a period.

• CPA's Report: This report expresses the CPA's limited assurance on the fairness of your financial statements.

Working With Callison CPA for Your Reviewed Financial Statement

If you need reviewed financial statements, we can help. The process typically involves gathering your financial records (bank statements, invoices, receipts, etc.) and providing them to our team. We’ll review your records, prepare the financial statements, and issue the report.

Reviewed financial statements may seem intimidating, but understanding the process and seeking help from a qualified CPA can make it a smooth experience. With proper preparation, you can obtain the necessary financial statements to secure your Tennessee contractor's license and confidently take on projects that match your business capabilities. To learn more and schedule a free consultation, contact us today!