DCAA Compliance Blog

Your Source for DCAA News and Information for Contractors

ReliAscent® LLC is the only government contract accounting firm that specializes in all aspects of government contracting compliance.  From our DCAA compliant accounting services, to monthly government contract accounting for all government agency awards, contract management & administration, and financial services & planning, our goal is to ensure the success of our clients, and all small business government contractors and grantees.  

In our DCAA Blog, we discuss the latest government contracting news from the Federal Government, the DCAA, and DCMA, as well as promotions offered by ReliAscent, and helpful tools and resources for contractors.

We hope you will visit and take part in the discussions on our blog on a regular basis. If you ever have any questions or would like to discuss how our experts can help, do not hesitate to contact us at any time!  


 

The importance of a Government Contractor's Cash Flow

Posted by Mike Anderson on Fri, Jan 10, 2014 @ 09:28 AM

The most important thing for any business is to generate revenue and then collect that revenue.  When there is a difficulty in collecting the revenue that was generated, the business can suffer from cash flow problems.  It has been estimated that 70% of businesses that go bankrupt were profitable when they closed their doors.  In addition, if a small business only plans cash flow once per year, they are nearly three times more likely to go bankrupt than a small business that does monthly cash flow planning.  If this is so critical, shouldn't more small businesses pay attention to this management tool?  The answer is yes but in many cases, unfortunately, the business owner my either not know how or not realize they should do this or have the knowledge or expertise to do it properly.  The savvy business owner will enlist the help of someone or some organization that can help them with this critical task. This task becomes more onerous when the business is a government contractor.  The cash flow analysis itself may not be any more complicated, but the factors that affect the cash flow may be more dynamic.  It is smart to employ an expert to help the small business in this area.

What are some of the factors affecting cash flow for the government contractor?  One of the biggest factors is getting paid on time.  Normally this is an advantage in dealing with the government, they have lots of money and will pay on time, if the invoice is submitted properly.  The "if" of preparing and submitting the invoice properly is the catch. There are, as with almost any government activity, lots of regulations, lots of requirements and proper protocol associated with billing the government.  The first, and most important, aspect is that the contractor must be registered in the Central Contractor Registration system.  This used to be know as CCR but now is known as the System for Award Management (SAM) and encompasses all the registration of the CCR and the certification of the ORCA system in one place (making this simpler by reducing the number of sites needed to complete registration).  If a company is not properly registered here, the invoice submitted to the government will not be processed.  The invoice submitted to the government also must include a Dunn & Bradstreet Number (DUNS #) and a Taxpayer Identification Number (TIN #).  This seems like a logical step but sometimes a small business may either forget or not know how to get a number and then use it properly in the invoicing process. 

Many years ago, the government used a Standard Form (SF 1034) for most invoicing purposes.  This form would guide a company through what it was seeking but, being a government form, it sometimes was a little complicated to determine what information was required.  An error resulted in rejection of the invoice and the contractor needed to correct this and re-submit.  This obviously caused delays in cash flow as the form was usually mailed back and forth several times.  Today, most of the submission is electronic.  It started with the Electronic Data Interchange (EDI) and the Web Invoicing System (WInS).  This has been mostly replaced by the Wide Area Workflow (WAWF) system.  Again, the WAWF system can be a little tedious for the uninitiated to navigate and enter the correct information.  Errors in entry will result in rejection of the invoice and delays in payment.  This factor, that obviously affects cash flow for a small business, can be avoided by having someone (or a company that is expert in this task such as ReliAscent) that is familiar with the system process the invoices to the government.  Small business owners have enough risk in making their business succeed without having to make sure they know the ins and outs of a detailed procedure for submitting invoices in order to get paid. 

Topics: government contractor, SAM, WAWF, Central Contractor Registration