Originally published on this site
Federal contractors face critical challenges in aligning accounting methodologies with the demands of the comparatively stringent requirements of their target market, the US government, vs. requirements of the commercial market base. Issues include maintaining constant audit readiness, the need for diligence and adroitness in information leveraging to develop a robust accounting operation, and the demand to stay on the cutting edge of applicable technologies and accounting workforce proficiencies, among others.
Contractors must be skillful in anticipating and implementing modifications to any policies, procedures, and systems that support compliance, in order to maintain pace with changing requirements for their companies.
5. Timely Preparation for Surprise Audits
As a government contractor, your business must operate under the assumption that it will be subjected to a thorough government audit. Audits can occur without advance notice. Maintain a condition of preparedness. Ensure that you can be confident that your company will receive a positive evaluation.
When a contractor is tagged for noncompliance of its accounting system, the necessary work to regain acceptance by the government is very difficult, labor-intensive, and time-consuming for management. Contracts may be terminated. Opportunities for new business with the government are often wasted as well. And, in some cases, payments may even be withheld on existing contracts, pending satisfactory improvements.
6. Maintaining Sufficient Staff and Training
Accounting errors jeopardize contractors. Inaccurate data, incorrect data entry into the system, or errors in the performance of internal accounting processes (such as erroneous contract cost allocations, for example), put the system at risk. And, personnel who are unfamiliar with common requirements and accounting processes for government contractors frequently expose companies to losses of contracts, and can even have a deleterious impact on a company’s investment in its accounting software.
Contractors must ensure that the entire accounting staff is fully skilled, and must have adequate policies and procedures in place for the prevention of mistakes, and especially for their timely discovery and correction.
7. Flexibility in Change from One Individual Government Point Person to His/Her Successor
Contractors often are required to build a system that meets the requirements that a particular individual in government authority believes is appropriate to the contractor, only to have that government authority (sometimes abruptly) replaced by another person whose ideas about requirements (sometimes starkly) differ from his/her predecessor.
The successful government contractor systematizes its accounting operations, as the company grows, in order to maintain and improve compliance. (The business may bring an accountant on board in a mid-level to senior-level capacity to establish a system.) The backup position businesses should constantly maintain if it is financially possible to do so, is one of readiness for transition, in order to seamlessly maintain the integrity of its system if/when essential people leave the company or become unable to fulfill their roles.
For additional information on setting up DCAA compliant accounting systems, and in clearly understanding the suitability of various technologies in order to avoid unnecessary and excessively costly or insufficient accounting platforms for government contracting, contact us below.