The standard is higher for government accounting when compared to private commercial markets. Contractors will face challenges in making sure that the federal government’s stringent accounting standards are met in a precise manner.
Remember the government has to prove how efficient they are with money because they are spending taxpayer dollars. This means that federal contractors must be meticulous in their accounting methodology in case of an audit.
At first, these stringent rules of accounting can seem very daunting. However, today there are many cutting edge technologies that can take the pressure off by making even the most complex accounting procedures quite simple. Also, having a strong accounting system in place will only make your company better in the long run.
Understanding The Regulations
There are many advantages to being a successful government contractor. However, the government has stricter rules and regulations regarding accounting when compared to private sector clients. It is important to keep up with federal regulatory requirements.
Federal government agencies receive their funding from taxpayer dollars and they need to justify their spending in order to prevent waste. We will help you make sense of government accounting so you can develop a methodology that works for you and your business.
The Defense Contract Management Agency (DCMA) helps define business systems requirements and provides direction on audits and approval criteria. Potential government contractors need to understand this agency as they define the approval criteria for awarding contracts. They also have a strong hand in guiding government audits. Speaking with them will help you with the following:
- direct and indirect cost segregation
- cost pools and allocation bases
- labor distribution systems
- maintaining compliance with invoicing clauses
- avast and ever-changing complex of other issues
Have A Clear Understanding Of The Government’s Accounting Requirements
The Financial Accounting Standards Board (FASB) states that contractors must comply with the following in order to work with the government:
- Federal Acquisition Regulations (FAR)
- Cost Accounting Standards
- FAR agency supplements
Your company should be clear on what the DCAA considers the responsibilities of federal contract actors. They include the following:
- timeliness of payments to subcontractors
- documentation of contractor oversight of subcontractors
- documentation of enforcement of flow downs
- documentation of support for subcontractor billings
- documentation of subcontractor reviews
Make Sure You Are Organized
Having solid financial records and a clear thought out process goes a long way to impress government agencies that you can handle the job. It presents a professional demeanor that is quite impressive.
Understand That Change Is Constant
Agencies are only allotted a certain amount of money through government funding. Changes in the administration can bring a total overhaul in what is a priority in comparison to previous years.
Many people think that governments are slow to change. However, as the world becomes more complex, a contractor needs to keep pace with the changing federal marketplace. It is extremely important for agencies to be transparent about their finances. Contractors must be strategic in anticipating and implementing modifications to any policies, procedures, and systems that support compliance, in order to maintain pace with changing requirements for their companies in regards to being a federal contractor.
Government audits can occur without any type of advance notices. Contractors must always be prepared in order to receive a solid evaluation.
A surprise audit that reports non-compliance with federal accounting regulations can have a lot of negative consequences. This could include termination of the contract and payments can be withheld unless improvements are in place. This can be very time consuming and stressful. This can also severely affect opportunities for future business with the government
The Key To Winning A Government Contract Is To Pay Attention To Guidelines
It is very important that you read closely what the request for proposals or RFPs wants in your bid. Make sure that you are aware of deadlines and who is handling the requests. Usually, small businesses have 6 to 8 weeks to submit a bid but this can vary, depending on the agency.
Make Use Of Government-Provided Free Tools.
You can identify contracting opportunities online by utilizing tools such as this forecasting tool that lets you see what opportunities are available. You can study the government contracts that are a couple of years old to see what requirements are needed to win the job. This puts you in an excellent position to have all your research completed when the contract is about to expire and you put in your proposal.
Do Not Give Up!
At some point, the process can be a little overwhelming. You must keep in mind that the reward will definitely be worth all the effort. According to the American Express OPEN survey, 57% of businesses said their revenue has grown significantly because of government contracting, and at an average rate of 61%. However, business owners should keep in mind there is no secret formula for securing a contract. The United States government is a very lucrative client for any small business.
The Government Wants Small Businesses To Succeed
In many markets, small businesses are often outcompeted by larger organizations that often have access to almost unlimited resources. This set aside actually might increase a small business’s chances of winning a lucrative bid.
The federal government is required to set aside at least 23 percent of its total spending specifically for small businesses. Several small businesses have made a fortune just on federal government contract awards.
To do any business with the federal government, you must register your business in the System for Award Management directory. The government will not hire any type of business (large or small) that has not registered in the SAM directory.
Please read one of the helpful blog articles on our site like Everything You Need to Know About SAM for Small Businesses. These blogs will help give you all the information you need to understand how we can help make the process very easy for you. Sam Directory will happily guide you through this often confusing process.