Tips for Government Contractors
Keep it SIMPLE!
There is a time and place for everything,
but simplicity and solid execution always
makes sense...and works! Keep your chart
of accounts and account structure simple.
Keep your accounting operations as
streamlined as possible. Our experience
is that there is a direct relationship
between streamlined, straight-forward
operations and success. If you must
employ creativity, use it to win
contracts!
Understand the Rules of the Game.
A good working knowledge of contract
types, the basic priniciples and rules of
accounting for government contracts, and
of the requirements of cost proposal
preparation is essential. You don't need
to be an expert, but you must understand
the fundamentals. When in doubt, don't
guess. Stop, get up to speed as fast as
you can, and then fire away!
Know your costs and manage them constantly.
Your ability to meet your indirect cost
rates is all important. The easiest way
to track rate performance is to track and
manage your labor utilization rate (the
percentage determined by dividing
billable labor by total labor) each pay
period and - more importantly -
year-to-date. This is because direct
labor is the primary driver of your
indirect cost rates. A good labor
utilization rate might be 85%. You should
know yours intimately.
Stick to your costs in pricing...don't buy-in and don't accept a certain loser!
Once you establish a certain pricing
structure for your company, it will be
very difficult to negotiate a higher one.
Remember that later, when you try to
negotiate your true (higher) costs, the
negotiator you are dealing with will have
to explain why, under his or her watch,
the cost of your services grew by XX%.
Accordingly, if you must lower your costs
to win a contract, the best place to
achieve the savings is in lower direct
costs. This is especially true if you
know that your competition's indirect
cost load (which is to say their pricing)
is similar to yours.
When audited, remember that more generally results in less!
Courteously answer the questions asked
and provide the items requested. Resist
the temptation to provide more. You have
nothing to hide, but the faster the audit
is completed the sooner you'll be back to
business.
Your auditor or contract negotiator should be an expert in his or her field...
but if something sounds "wrong" to you,
it could very well be! Do what you can to
buy enough time to check the matter out.
If problems arise down the road, it will
be of little consequence (and no solace)
that you were right, and the "other"
party wasn't.
Profit will come from well negotiated fee, but don't forget benefit plans!
Experienced contractors recognize, albeit
quietly, that the real rewards in
government contracting come not from
contract fees, but from above the line
profits: those that can be safely taken
as allowable costs through various fringe
benefit plans. If there ever was a good
reason to control other Overhead and
G&A costs, being able to contribute
more to these plans is one. If you are
just starting out, include as many of
these benefits in your indirect cost
budget as you reasonably can. You'll
never regret it!
When moving to a new system, establish your plan for transition...and then execute!
When you decide to move to a new
accounting system and purchase new
software, it's critical that you get
"up-and-running" as soon as possible.
While this may seem obvious, in moving to
new software numerous obstacles to
implementation may emerge. The best
approach is get the new software
fundamentally operational - and then
"fine tune" as may be necessary or
desirable. If you have selected the
correct software, you will not find
yourself "painted into a corner" in
following this approach. Instead you'll
find that you're capable of just about
anything.
