Navigating FAR and "late payments"
It always amazes me to hear about small business entrepreneurs who are successful in receiving SBIR grants or government contract(s) but suddenly have difficulty in collecting money or continually have late payments from the government. This difficulty leads to cash flow problems that can bring a small business to its knees rather quickly. When this happens, it becomes a panic situation and, more often than not, the business ends up either losing money or making less money than they thought they were entitled to make.So where do they get into trouble? One of the most common mistakes we see is that they have a “false sense of security” about their accounting. Many entrepreneurs are very good at math (being either a scientist or engineer) and accounting for a small business is “just not that difficult”. Organizing, adding and subtracting of numbers is something that they are good at. So they set up simple accounting systems that would work exceptionally well for most commercial businesses. Unfortunately government contracting is different from most commercial businesses. They quickly find out that the government has a different way of accounting and is very particular in how it is done as the contracts become larger. For SBIR contracts this usually doesn’t occur until the Phase 2 stage which further “lulls” the contractor into a “false sense of security” about their accounting system. When confronted with the Federal Acquisition Regulations (FAR), many times the entrepreneur will think he can figure it out himself. This might be true if they have enough time. There is so much to read and pay attention to in the FAR regulations that most of the time the entrepreneur doesn’t have the time or patience to “figure it out” on their own. It is our experience that the earlier they get professional help in this area, the better chance they have of securing their cash flow and making money.