Year-end change: Government Approved Accounting System
If you are a small business, working with funds from awards from the Federal Government and you don't know if your accounting system is compliant with government regulations such as the FAR, you should consider making the switch. The perfect time to switch your accounting system is the end of a fiscal year. We are approaching the end of the fiscal year for a large percentage of businesses (65% of publically traded companies in the US have a Dec. 31 fiscal year end). With the approach of a major holiday season as well, the time to consider changing your accounting system is right now. If you start working on this change now, it will be ready to operate come January first.
Now most small businesses use an accounting program like QuickBooks® to do their accounting. We think that is great. QuickBooks® is a great program for accounting, especially for a small business. The only problem is that QuickBooks® is not designed for meeting all of the requirements that a government contractor is required to do (for a cost type contract or grant). That doesn't mean that the small business needs to look at a more expensive software just because they have cost type contracts from the Federal Government. There are ways to make a QuickBooks® system meet all of the government requirements but you need to know how to do this. You also need to evaluate the future of your small business and what you expect your needs will be in the short run (1 year) and long range (5 year plan). This could enter into your decision on switching to a new accounting system. My point is you need to assure yourself that you will not have to make another change a year or two from now.
I have been talking to a number of small companies since the middle of the summer that the October/November timeframe is the best time to consider this type of change. The change would involve a couple of steps including:
- Re-structure your QuickBooks® file into a job costing structure that is compatible with both government requirements and compatible with any external program required to calculate indirect billing rates and monthly job cost reports
- Select an external program or engine that can calculate actual indirect billing rates, monitor indirect billing rate performance over the year and caculate and print out subsidiary job cost reports with enough detail to provide billing to the government
- Verify that your timekeeping system is complaint with government requirements and that it either electronically or manually can input time into the QuickBooks® program for proper labor distribution
- Verify that you have sufficient policies and procedures in place to completely describe how this system operates and assures consistent operation
As you can see, this is not something to leave until after Christmas. If you do, you may end up not getting a system in place until late January or early February and then play catch-up with journal entries. Starting now and having this ready to run on 1/1/14 is the best option. It is still doable. Call me today if you are interested in investigating this.