Now that we are reaching the end of the "incurred cost proposal" season for most contractors (contractors whose fiscal year ends December 31st), most accountants are breathing a sigh of relief. This is much like the sigh we hear after April 15th in many CPA offices. The important thing to remember, however, is that you can actually help reduce your pain next year by monitoring your rates through the year.
Many companies fail to recognize that they have some control over the indirect billing rates, especially small companies. The middle of the year is a prime time to look at what your actual indirect rates are and compare those to your projected indirect rates. I am really surprised at how few government contractors actually do this. There are corrective actions you have time to implement in month 7 that will have enough time to impact the end of the year rates. If you don't look at the rates until the end of the year, there is very little that can be done to impact the overall year end rates. For instance, if the indirect rate for overhead is running too high, it could be as simple as spending more time on direct work for the remainder of the year to bring the overhead rate back to the projected rate. There can be a real science of analyzing these rates, the effects and how to control them to properly manage your indirect billing rates.
At ReliAscent, we have developed some tools and applied our expertise to be able to effectively manage these rates. This is possible if, and only if, the efforts are started early enough in the year. The later a contractor waits to look at this, the less effective it will be. So now is the time to start analyzing and taking corrective action on managing these rates. If you would like to discuss this in more detail, or how we might be able to help you do this, please don't hesitate to contact me today.