CFO Cashflow Management - Part II
CFO’s in the government contracting environment will learn it’s no easy feat knowing how and when to get paid. These terms are spelled out in each contract or grant which may include some of the following methods:
- Delivery payments (based on delivering contract end items – i.e. product)
- Milestone Payments (based on either performance or submittal of data)
- Cost Vouchers (based on actual costs calculated through a certain period)
- Progress Payments (a complex variation of cost vouchers)
- Drawdown (the typical method for grants)
Gone are the days of mailing invoices to government customers (we hope). Nearly all contracts and grants require invoices be sent to the buying office or through an agency web portal. Instructions in the contract or grant will outline the relative complexity of each process. The most prevalent government invoicing and payment system is Wide Area Workflow, or WAWF.
Wide Area Workflow (WAWF)
Department of Defense (DoD) contractors face a number of hurdles submitting invoices through the DoD’s WAWF system. Users must register with the web portal and provide authority for others to do so on the firm’s behalf. Understanding how your contract is structured and how that information is portrayed in the WAWF portal can be intimidating.
The government does an adequate job of providing training, but a novice to government contracting can soon get lost in the maze of regulatory requirements and billing choices. We find the WAWF helpdesk can quickly determine any problems with your billing submittals. You’ll need some patience at times to be connected to an agent.
Contacting your local DCMA (ACO) office and asking for help may also be useful. If after these attempts you are still confused by the terms and definitions involved in this process, a third-party such as ours can help unravel the mystery.
While thousands of dollars may be riding on a voucher hung up in WAWF, getting the right help typically corrects the problem very quickly (if your firm needs WAWF Help, visit our WAWF/Government Invoicing Services page, or contact ReliAscent).
Incremental funding dance
More government contracts are being incrementally funded, meaning not all the funds have been allocated to the project. While the government should have a plan in place for fully funding a contract, those plans could go awry based on the prevailing budget climate. It’s incumbent on a CFO to recognize when a contract is fully or partially funded, and pester the government well before the funding runs out.
One method used by the Navy segregates future contract performance into “options” that can be exercised once the funding shows up. While this is a more structured approach to incrementally funded contracts, it doesn’t alleviate the risk the contract could be terminated for the convenience of the government should funding eventually not show up.
Money under your contractual cushions
Finally: don’t overlook the following ways you can increase or improve your cashflow:
- Qualifying small businesses can bill more frequently, and get paid quicker.
- The government withholds a percentage of fee (15%) on cost-plus contracts. Don’t forget to bill for that once the contract is closed out, and some of it before closeout.
- Beware of project scope creep. For most contracts, you are allowed to identify and price contract changes and avoid overrunning project budgets.
A Note From ReliAscent:
Part VII is the final installment of our Government Contractors CFO's 101 blog series. Due to its popularity, and requests from contractors and blog subscribers, we will bring this series back each year (covering new topics, and going into greater detail on specific topics and issues faced by contractors). In the meantime, ReliAscent will compile the 2016 series into a white paper, which we will be releasing in mid-October.
If your small business needs the help of a Federal Contracting Outsourced CFO Expert (like our very own Dave Donley), or you would like to learn more about our CFO services or WAWF / Government Invoicing Services, please visit our website and/or feel free to contact us at any time.
At ReliAscent, the Success of our Clients and all Small Business Federal Contractors & Grantees is our Top Priority!
- Tyler Link, Marketing Manager