In the previous blog, we looked at primary challenges government contractors face when addressing internal accounting requirements and compliance. In Part 2, we want to cover the spectrum of duties for government contracting accounting teams and a few best practices.
As an experienced partner for government contractors, professionals at GovCon365 have dealt with numerous accounting systems. Though having an optimal and robust system, like Dynamics 365 for Government Contractors, is a considerable advantage, government contractors also need appropriately trained accountants. As we described in Part 1, government contracting accountants run into a catalog of challenges, and they need the necessary skills to navigate through those challenges.
There are particular skill sets and necessary background knowledge for efficient operations in government contracting accounting. For instance, accountants need to understand forms/formats of pricing proposals, direct/indirect cost rate submissions, general cost principles, allocation, reasonableness under specific regulations (i.e., FAR and CAS), and more. They need to adhere to accounting systems requirements, the types of contracts and their impact, government billing, handling auditors, and so on. Additionally, all accountants should have a basic understanding of the following duties:
- Analyze conditions of the federal marketplace, the acquisition lifecycle, and relevant statutes
- Understand key terms and definitions
- Recognize contract types
- Accounting differences in acquisition contracts
- Identify general-to-specific commercial item differences
- Define allowable, cost reasonableness, and credits
- Apply basic CAS principles and limits
- Understand the Truth In Negotiation Act (TINA), as well as Cost & Price Data
- Determine basic indirect rates
- Recognize change orders and pricing methodologies
- Understand the audit process
Best Practices for Government Contracting Accounting
1) Find the Right Software
One of the most vital aspects of exceptional accounting processes is having the right system and technology for your business. The time of spreadsheets is over, and the age of digital efficiency has quickly taken the government contracting industry by storm. That means the market is flowing with accounting systems and ERPs that match the requirements of government contractors and adhere to the regulations that manage them. Your accounting team needs to find a flexible, DCAA-compliant software that fits into your budget, meets your needs, and provides your accounting team with a user-friendly interface for efficiency and productivity.
2) Understand Changes in Contracts
As your team starts winning bigger bids, the details of your contracts and accounting systems evolve to match the regulations appropriate to that growth. For example, when a contractor wins a deal for a $7.5 – $50 million bid, there are four additional requirements under CAS that now apply to those contracts. When you exceed the $50 million threshold, you’re required to comply with all 19 requirements of CAS, which is why staying on top of business changes for these wins is paramount for proper accounting. Knowing how changes in contract size affect operations and requirements is vital to compliance and accounting best practices.
3) Be Vigilant With Record Keeping
When we talk about “record-keeping,” there are so many topics we should be considering: timekeeping records, company-wide ledgers, subcontractor forms/invoices, etc., and keeping detailed documentation on all of them takes vigilance and attention to detail. Fortunately, the effort is worth the time: accurate record-keeping results in better business insights, increased customer satisfaction, and if an auditor just so happens to knock on your door, you’ll be ready with all the necessary materials.
4) Always Be Audit-Ready
Everything we’ve discussed up to this point boils down to being audit-ready around the clock. In addition to the audit process costing time and money, if you fail to pass, the cost is tenfold. Thus, government contracting accountants should run a tight ship and make sure that at any moment, they’re ready for an audit, whether it be DCAA, FAR, CAS, or any other federal review. Always be prepared!
Accounting procedures for government contractors are a central aspect of the business requiring persistence, dedication, and thoroughness. The duties can accrue demanding challenges, but overcoming them produces excellent results, strengthens an organization by providing a safeguard against fraud and noncompliance.
If your business is looking to evaluate its accounting software or procedures, feel free to reach out to us via the comments below or contact us here. Experts at GovCon365 have an overarching knowledge of accounting systems, methods, requirements, and compliance to help government contractors build a better business. Whether its accounting or ERP, we can deliver exceptional solutions to any problem you face.