THE ROLE OF BANK STATEMENTS IN THE CIDB REGISTRATION PROCESS
One of the key requirements when applying for the CIDB grades from level 2 to 9 is the provision of the bank statements to the Construction and Industry Development Board.
But, has any of the applicants ever wondered, what the CIDB looks for when they go through your bank statements.
Does anyone know the impact of the bank statements on the approval of their required CIDB grade?
In this article, I will be dealing with exactly, what the CIDB looks at when inspecting the bank statements.
The largest contract revenue amount.
One of the key qualifying requirements when applying for a CIDB grade 2 & higher, is the value of the highest construction contract that your company has ever carried out and completed within the past 5 years.
But since it is a relatively easy task for anyone to fake and produce a typed “largest contract”, the CIDB will try to verify the authenticity of your contract by adding up the cash inflows reflected on your bank statement to determine, if indeed, those cash flows match and add up to the contract amount.
When the CIDB is doing so, they will also try to determine if the contract amounts identified on the bank statement, are from the same payer.
Therefore, it is extremely important to ensure that the deposit reference name from your employer, remains the same.
For example, if you completed the project from the company by the name of ABC (PTY) LTD, please make sure that the reference on your bank statement, remains consistent as “ABC” so that the CIDB, without the benefit of a doubt, can conclude that yes indeed, you did receive these amounts.
The financial statements revenue.
The second aspect that the CIDB looks for on your bank statement, is to determine that your accountant did not do you a favor by overstating your revenue amount.
The CIDB shall add up each and every single cent that came into your bank account for the financial year under review.
If the cash inflow has a variance of more than 10%, the CIDB shall then start to doubt the revenue figure reported on your financial statements.
They shall not tell you this at first, however, they might request for additional supporting documents in order to avoid you the embarrassment.
They will request additional supporting documents such as the VAT statement of accounts as well as the monthly VAT201 statements for the year.
If you are lucky enough and have these SARS tax documents, they will add up the incomes reported on those documents.
If these incomes do not add up to the revenue claimed on the annual financial statements, the application for the CIDB grade required, shall be dismissed.
However, not all is lost, they might approve for you a grade, way lower than the one you had initially applied for.
Therefore, when preparing financial statements, a fine balance has to be struck between the figures displayed on your company’s bank statement together with the financial statements claimed.
In my accounting firm, I have seen so many accountants preparing financial statements, with absolute disregard to the information contained on the bank statements and this has led to the down fall of so many CIDB applicants.
Whatever you do, do not prepare financial statements that deviate from the bank statements with a variance of more than 10%.
If all the income that came into your bank account was less than R400,000 in a year but you want to claim that your revenue was R2 Million, you are guaranteed to have a hard time trying to prove that to the CIDB.
And by the way, it’s not like the CIDB gives you the opportunity to come to their offices to argue with them, therefore, if it smells and looks like a fish, they will call it a fish.
The quality of your bank statements.
The CIDB has experienced with a number of fake bank statements with some contractors trying to push their luck.
Please, when you submit your bank statements, try to use the original PDF statements downloaded directly from the bank’s app’s. Avoid sending bank statements that have been photocopied like a gazillion times. These tend to be unreadable and the CIDB will just send them back to you.
Guess, whose time has been wasted, yours.
And least but not last, make sure that your bank statements are complete, you do not want to submit bank statements that are missing a month of June & July to the CIDB.
And finally, and one of the most important to do features on your bank statements, please high light with preferably a yellow highlighter, the amounts that add up to your largest contract when applying for CIDB grade 2 & higher.