Indirect Rates Management

I talked about this topic a couple of years ago on the Tech Biz blog.  I think it is important enough to re-post and re-visit now. 

You may remember the TV commercial many years back where the announcer said:

"Its 10:00pm.  Do you know where your children are?" 

The idea was to focus parents’ attention on their children in the formative ages.  Get involved in their lives so that they make smart choices.  By managing your time with the kids, you will come to know them better, they will understand you and the whole management issue becomes easier.  The same might be said right now to government contractors:

"It's September; do you know where your indirect rates are?"

The parallels here are astounding.  The premise on the parenting message is that if you as a parent don't know what your children are doing at this hour of the day, you may have a nasty surprise when they get caught doing something you don't like.  In the government contracting world there could be similar consequences.  For instance, if your rates are not following your provisional rates or approved indirect billing rates, you could be faced with giving the government some money back at the end of the year or the end of the contract.  Many government contractors do not realize that the government can and will ask for a refund if the rates come in lower than the contractor had predicted.  This can mean the difference in making money on a contract and losing money on a contract.  In some instances, it could mean bankruptcy for the business.  

You might ask that if you did know where your rates were, how would that change anything?  Well, if your rates are running too low, there is still time left in the year (if you act right now) to spend the indirect money that was originally budgeted in order to bring the rates back into line before the end of the year.  It might mean spending less time on direct work between now and the end of the year but if that impacts the bottom line, shouldn't you consider those actions?  The longer you wait, just like postponing writing that term paper in college, the more difficult this will be to bring your rates back into line.  Many times it takes several months’ efforts to get the rates back to where you predicted.  All of this depends on how much you are "under-running" the rates and how large your company is.  There are lots of variables in the equation and it is not so much a "simple game". 

Now is a good time to look at your indirect rates, compare them to your approved billing rates and take action to prevent unpleasant surprises at the end of the year.  The experienced staff at ReliAscent has had over 20 years’ experience in reviewing these variables, weighing options and picking courses of action to manage these rates.  In addition, there are tools that can be helpful in monitoring the performance of these billing rates to make sure they end up in a position that will have the most profitable effect on the company as a whole.  Again, now is a great time to evaluate this situation.  If you have an account manager at ReliAscent, call today and ask for a free evaluation of what needs to be done.  If you have not worked with ReliAscent (or Tech Biz or PBC) in the past, please call me and we can do a quick and free evaluation of your system to see what it would take to get onto such a program.

It's September; do you know where you’re Indirect Rates Are?


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