In the world of government accounting having a compliant accounting system is critical. Small firms that are dealing the government and keep their accounting in-house spend far too much money in percentage to gross revenue on in-house accounting. Take a look at the detail in just pure dollars.Read More
DCAA Compliance Blog
Your Source for DCAA & FAR Compliance News and Discussion
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.
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With the tightening of the Federal budget combined with the effects of sequestration take their toll on government contracting companies are looking for survival strategies. For large corporations that are well diversified, this task is easier as they can shift resources from hard hit departments to other business units that are doing well. I have heard of such strategies employed at some of the large government prime contractors where they were able to successfully report better than predicted results due to business units in commercial aerospace or foreign sales having improved results. These business units were able to keep the company in the black, even though the segment of government contracting might be down. Even so, these large companies will have to scramble in the future if sequestration continues and there is every indication that this will continue for the immediate future. On the other hand, what about small business? Small business usually doesn't have the diversification or the international sales groups that can help keep the company in the black.
We have talked recently about outsourced CFO help as well as some of the reasons for outsourcing a small firm’s complete accounting function. By complete accounting function, we mean not only doing the books for a small business, but helping that business with budgeting, reconciliations, financing options as well as other strategic recommendations. A large company has a full accounting department to perform these functions but a small business cannot afford a full accounting department. Outsourcing the full accounting function can provide for all of those skills on an “as needed” basis or as some refer to it, “by the drink”. ReliAscent also has a group of partners that can be utilized in order to provide an even wider range of services to our clients. One of these partners is Federal National Commercial Credit (FNC2), a provider of working capital solutions to government contractors & other small businesses. I thought it might be good to talk about the importance of these partnerships, especially when it applies to a real-life situation. Recently, ReliAscent performed a number of services for a client of FNC2. FNC2 needed to verify their client had an adequate accounting system to support the amount of financing that the client was requesting. ReliAscent was able to go in and:
When you receive a contract or a grant from the Federal Government, there are always lots of terms and conditions attached to these relationships. One of the most onerous is related to how you do your accounting so the government can make sure it is getting the most favorable customer status (the best pricing). In dealing with the Federal Government it is always pointed out that all of the terms, conditions, regulations and other items are publicly available. This is very true. What may not be obvious is that these terms, conditions and regulations are very intertwined and difficult to fully understand and therefore difficult for a small business to comply with. When you compound this with the issue that a small business needs to focus on the core competencies to make the business successful, it becomes obvious that it might be not only a good idea but it could be financially proven to be the best decision to outsource routine tasks like compliance and accounting. So what are the top 10 reasons that you should outsource your accounting? This is our list, you may notice others:
This question may come up many times in a small business. It may start out even more basic as "Do I need an Accountant?". As you can see from the referenced article, there are many sound reasons to enlist the help of an outside accountant to help your small business. All of these reasons are valid for the government contractor and then some. There are a myriad of rules and regulations put on the business that chooses to contract with the government. Some people even refer to accounting for government contracts as "Job Cost Accounting on Steriods". There is definately a "price" associated with government contracting. I know that many small companies decide to try to do the accounting and contract compliance themselves, in order to save money. After all, all the government requirements are "public domain" documents and readily available. This is true, however due to the huge volume of regulations, the complexity and intertwined references of the regulations, it can easily consume excessive time for the uninitiated. Heck, it can even drain a lot of time for the experienced regulation navigator. So to me, the question is not so much about saving a dollar up front but how much money will you spend overall trying to stay compliant. There are two ways to calculate this "cost of doing business". The obvious cost is that of the money spent to do the accounting. The not-so-obvious cost is the opportunity cost related to the work the individual doing the accounting. In other words, what is that person not doing that could help impact the company bottom line while they research regulations, do the accounting, re-do the accounting due to initial errors, reconcile the accounts due to differences that were initially not obvious and other seemingly mundane tasks. I have met many scientists that were frustrated doing accounting because it took more of their time than they thought they could afford (and took them away from what truely excited them). The other cost is that of delayed payments due to improper records, government audits and the possibility of cancellations due to non-conformances. I've seen all of these happen to companies that lease suspected it.