Making matters worse, they may not be keeping accurate or compliant financials and may be subject to audits or loss of contracts. 

General bookkeeping is NOT adequate for government contracts.  

Monitoring financial data, doing system checks, and reviewing contract requirements on a monthly basis can help keep things on the right path. Key Performance Indicators (KPIs) should be compared to benchmarks and analyzed consistently to spot any issues before they turn into bookkeeping nightmares. 

Monthly KPIs present a clear picture of accounting done right—or wrong 

There are many financial, system, and contract KPIs that can be monitored on a monthly basis to stay on track. We’ll go over a few that every GovCon should review once a month. 

Gross margin indicates the direct cost as a percent of revenue. This should be consistent month over month. Fluctuations may indicate missed cost. 

Current ratio takes current assets over current liabilities and shows how quickly liabilities can be paid off. For example, if the ratio is 2.0, you can cover current liabilities two times over—a healthy ratio.  

Actuals to budget show how close the project is coming along to what was initially planned. If it is off, it’s time to investigate why. It may indicate a need to reforecast the rest of the year. 

Reconciliation of the general ledger to the project ledger is critical to ensure all costs are being captured and allocated properly. If these reconcile, the system is working. If not, it’s time to investigate why the two ledgers are out of sync. 

Profit reviews compare the current period profit to the year-to-date profit for a contract. This should be the same month over month—a swing may indicate something is off such as missed revenue or subcontractor costs. 

The difference between general accounting and GovCon accounting is significant

When it comes to accounting, math is math. But for GovCons, accounting is more about the rules that the math needs to follow.  

For instance, bookkeeping would take $12 in cost and put it as one line item. For GovCons, that $12 may be split up according to federal rules into specific cost pools. 

And if things aren’t reconciling, there could be major consequences. 

Software helps keep monthly KPIs monitoring efficient, consistent, and compliant

 The DCAA considers month-end closing of books a best practice and using KPIs to monitor compliance can be easier with specialized accounting software for GovCons.  

Accounting software must meet the adequacy criteria of the Defense Federal Acquisition Regulation Supplement (DFARS) Business Systems Rules to pass a DCAA audit. There are 18 criteria for a system to be deemed adequate – which can be broken down into five major capabilities: 

1.     Internal control over approval, structure, access, monitoring, and policies 

2.     Segregation of direct and indirect costs on a monthly basis for allocation to projects 

3.     Reporting costs under general ledger control, subsidiary cost ledger, and transactional details 

4.     Timekeeping and labor distribution of direct and indirect labor costs 

5.     Compliance with contract terms, conditions, regulations, and other laws 

How much time are you spending on accounting? 

According to the National Small Business Association’s 2017 Small Business Taxation Survey, entrepreneurs spend 40 percent of their time on accounting each year.  

Have you ever added up the number of hours you spend on keeping the books? The reality can be harsh. By monitoring KPIs and investing in software, you can ease the burden of time and cost. And by working with a partner like WJ Technologies, you can have peace of mind knowing your accounting is compliant and in good hands—leaving you to get back to doing what matters most. 

Contact us to see how we can solve your GovCon accounting problems.  

Opportunities for the Government Contracting Industry

Government contractors that design and develop new or improved products or processes can realize substantial tax savings with the Research and Development (R&D) Tax Credit. To promote competition in the global marketplace, the R&D credit incentivizes innovation within the United States and is essentially an activity-based jobs credit.

Many government contractors are unaware that their everyday activities may make them eligible for the credit. These activities are generally those undertaken to improve products or processes — by introducing new functionality, higher quality, or better performance — as well as activities performed to develop new products, software, or automated manufacturing lines.

The R&D tax credit tax provision allows companies to capture expenditures associated with employee wages, outside contractors, and supplies consumed throughout the development process. It is these costs that essentially get converted into a tax credit.

Benefits of the R&D Credit 

There are many advantages of the R&D credit, including: 

• Increase cash flow and immediately reduce current year income tax liability 
• Qualified Small Businesses can offset up to $250,000 of the FICA employer portion of payroll tax 
• Owners of Eligible Small Businesses can offset alternative minimum tax (AMT) liability 
• Returns can potentially be amended to claim credits in prior years 
• Permanent tax savings and reduction of overall effective tax rate 
• Many states offer R&D tax credits that can be claimed in addition to the federal R&D tax credit 

Some companies that are already claiming the credit do not realize that they are incorrectly computing their potential benefit. It is highly recommended to contact professionals to review the R&D tax credit analysis. 

Does Your Manufacturing Business Qualify for R&D Tax Credits?

The tax code provides a broad definition of qualified R&D activities. Efforts related to product or software development are common. However, numerous activities, such as new or improved manufacturing processes, may also qualify. In fact, many companies are not aware that they are conducting activities that are eligible for the R&D credit. Typical activities that may qualify for the R&D tax credit include: 

• Design and development of new or improved products, equipment, and manufacturing processes 
• Design and implementation of new/improved software and manufacturing technologies Automation, streamlining, and software development 
• Design, development, and testing of prototypes 
• Evaluation of new or alternative materials 
• Designing tools, jigs, molds, and dies 
• Customizing equipment or machinery 

Contracts

Research is typically either internally generated or performed pursuant to a contract. For purposes of the R&D credit, however, not all contracts are created equal. This is to avoid “double-dipping” by a contractor and a contractee both claiming the credit for the same activity. For this reason, a contract analysis should be performed to determine whether research is “funded.” Expenses related to “funded” contracts are excluded from the R&D tax credit. However, not all government contracts are funded. 

• Good Contracts (Not Funded) 

• • Company retains substantial rights to the results of the research (even if the government has rights to the research as well) 
  • Company is at economic risk for its R&D (work performed under fixed fee contracts) 

• Bad Contracts (Funded) 

• • Contract provides the government exclusive rights to the results of the research 
  • Company is paid whether or not research is successful (hourly, cost plus, cost plus fixed fee, cost plus guaranteed max, time and material, and cost reimbursable contracts) 

R&D Tax Credit Expertise 

CohnReznick’s R&D Credit Group can provide your business with an R&D tax credit estimate at no cost or obligation. This analysis can include discussions with senior management responsible for development efforts and an evaluation of available development documents. Based on this information, we can model your available credits for each year and jurisdiction, and thoroughly explain the results of our preliminary analysis. If sufficient benefit exists to warrant a full analysis, we will design a work plan that best fits your company’s needs and budget. 

Examples of successful R&D credit efforts: 

Aerospace Manufacturer 

• • 40 engineers 
  • Federal and State R&D Credits of $1,600,000 

 Data Processing and Software Developer 

• • 20 software developers and business analysts 
  • Federal R&D Credits of $110,000 

 Manufacturer of Electromedical Instruments 

• • 55 engineers and software developers 
  • Federal R&D Credits of $260,000 

Let the team at CohnReznick review your business to ensure you are maximizing your available credit! As the R&D tax credit is complex, we can ensure you are capturing all available benefits while mitigating potential audit risk.  

Contact CohnReznick today!

In-house accounting personnel for government contractors can be costly. Employers pay wages and benefits, overhead expenses, recruitment costs and provide continuing education opportunities – all at a significant financial cost.

The latest Bureau of Labor Statistics data shows:

$ – Mean annual wages for Accounts and Auditors = $83,980

$ – Bookkeeping, Accounting, and Auditing Clerks wages = $29,120 to $61,980

$ – Accountants and Auditors wages = $47,970 to $128,970

$ – Financial Mangers wages = $77,040 to $191,860

How Much Could You Be Saving With Outsourced Accounting?

Outsourced accounting services allow you to focus on running your business without the hassle of keeping the books. Imagine how much you would save when you outsource:

• Managing daily accounting operations
• Maintaining accounting and technology systems
• Conducting financial analysis
• Preparing for audits
• Developing accounting policies and procedures
• Producing financial management reports
• Improving cash management
• Monitoring compliance for government contractors

According to the 2021 Gauge Report, companies rate their top three Government Audit challenges as: Rates, Timekeeping, and Billing. Can you relate? What if you could take some of these off your plate?

In House Accounting: Efficiency, Cost Reduction & Empowerment

Leveraging the technical and financial resources and expertise of outsourced accounting services results in efficiency, cost reduction, and empowerment – giving you the confidence to make informed and intelligent financial decisions.

Efficiency – processes are standardized, technology is easier to deploy, and the time it takes to close your books is greatly reduced.

Cost reduction – cost and overhead associated with hiring, training, and managing full-time staff are eliminated.

Empowerment – allows nonaccounting personnel to focus on what they do best.

Did you know? Globally, office workers spend close to 69 days per year on administrative tasks. That is 552 hours a year – roughly one-third of the working year – in lost productivity. 

You and your staff should be doing what you do best – and outsourced accounting services can help you do just that. By eliminating non-revenue generating tasks, you can get back to focusing on growth and what matters most for your company.

WJ Technologies provides scalable services for the right-sized accounting support for every client. We bring years of proven government contracting experience by offering a total solution – helping you reduce the cost of ownership and maximize the benefits you receive from your investment in Unanet, Deltek Costpoint, JAMIS Prime, and QuickBooks accounting systems.

Learn more about our right-sized outsourced accounting services.

Although DCAA compliance relates to more than just your accounting system, many of their standards relate directly to your accounting practices – making it imperative that your system is set up for compliance from the start.

Is QuickBooks the best accounting system for GovCons?

QuickBooks is a standard accounting system for small- and medium-sized companies. In fact, many smaller companies consider it the gold standard because you find it everywhere, it is user-friendly, has an affordable price point, and is widely available.

However, although any system can be set up for DCAA compliance, QuickBooks is not designed with GovCons in mind. There are issues unique to the federal space that QuickBooks does not cover, such as managing costs as direct or indirect, allowable or unallowable, at the lowest work breakdown structure (WBS), or dealing with indirect costs and mandated billing formats (DD250, 1034/1035).

Many GovCons find they must utilize third-party software and additional spreadsheets for offline workarounds and manual report development – and any missteps can lead to audit trouble.

Signs you may have outgrown QuickBooks

Examine your company’s current practices to see if there are signs you have outgrown QuickBooks.

1. Manual processes. Are you gathering data from disparate systems and manually entering it into QuickBooks? Or pulling data out of QuickBooks for analysis in Excel or other software? A little of this is okay for a while, but you’ll start to make mistakes as you grow and have more and more contracts and spreadsheets.
2. Spreadsheet reliance. Does staff waste time playing “find the right spreadsheet” to make sure they’re working off the most current spreadsheet? This can lead to error and audit problems.
3. Disparate systems. Are you using several systems to manage the business? Ideally, all ERP functions should be in one place – accounting, inventory, and assets at the very least. CRM and HR are often handled by specialty software, but if you’re not doing all financials in one place, you’re likely wasting time and possibly creating errors and problems.
4. Few user licenses. A standard ERP solution will likely provide a license for every employee. Then, the company decides what level of access that includes, giving project managers, HR, and management access to reporting, planning, and budgeting systems – allowing for collaboration and overall synch.
5. Compliance. The unique requirements for government contracting start to become difficult to manage in QuickBooks. Because most of the work is done manually offline, you must stay on top of requirements, versus the software being designed and built for it.
6. Lack of in-depth reporting capabilities. When accounting is forced to rely on spreadsheets for reporting, the results are often error-prone, and the gathering of data is labor-intensive.

The disadvantages to QuickBooks are problematic

Because QuickBooks lacks the capability to perform DCAA-compliant functions, you must use expensive plug-ins, additional third-party systems and software in order to check all the boxes required to pass a DCAA audit. Having to use multiple applications, various platforms, and systems that don’t “speak” to one another could be adding unnecessary hours and stress to your accounting management practices.

Smaller businesses with only one or two government contracts may not mind the added work when using QuickBooks – but they may not realize that this system is not primed to help grow and gain more lucrative contracts in the future.

There is a solution when you have outgrown QuickBooks

The cost and energy required for upgrading to a new system can feel beyond reach. But can you afford to put it off? Consider the cost of noncompliance, wasted time and low morale. There are solutions that eliminate the wasted time spent to stay compliant – and let you get back to focusing on more meaningful work.

We evaluate your company’s needs and offer the right solution for your accounting software issues. Let us help – contact us today.

GovCons are subject to audits concerning their accounting practices as well as how they address cybersecurity and the protection of government information. It is a continuous effort to monitor and review – not a once-a-year reckoning to overcome.

First-time GovCons, as well as experienced ones, can easily become overwhelmed by the reporting efforts and requirements. What’s been done in the past may not be sufficient to remain compliant today with the ever-shifting and evolving regulations.

An investment worth making

Investing in a comprehensive accounting system with built-in guardrails to keep you in compliance is a solution that saves you time and minimizes risk. There are many things to consider when choosing an ERP that is purpose-built for GovCon compliance.

Make a list of what an ideal system would provide. We’ll start you off with some of the things we believe make an ideal solution:

• Specifically designed for GovCons
• Provides real-time insights
• Offers secure cloud storage
• Meets cybersecurity compliance standards
• Is scalable
• Integrated modules
• Customizable reports, workflows and dashboards
• End-to-end audit trails
• Communication tracking

It may be hard to believe, but there are solutions out there that do all of this – and more. With the right support and knowledge to back up your decision, you can have a system in place that will give you peace of mind when it comes to staying up-to-date on governmental and agency compliance standards.

Contact us today and we can walk you through the different solutions that would work best for your business needs.

Best practice for ICS involves maintaining excellent records and documentation that prove the need to justify any costs. The data reported is used to determine a company’s actual indirect costs versus the indirect costs provisionally billed for a fiscal year.

Will you pass the DCAA ICS Adequacy Checklist?

An ICS report must pass nearly 50 questions on the DCAA Incurred Cost Submissions Adequacy Checklist to be found “adequate.” Common, yet avoidable, reasons for DCAA to find ICS to be “not adequate” are:

• Not including all schedules with the submission
• Formula errors (for example, adding a row to a schedule, and failing to copy the formula row)
• Schedules that fail to tie to one another within the submission

ICS reviewers look for any significant risks, such as business system deficiencies, that have a substantial impact on the final indirect rate proposal for the fiscal year, math errors, and incorrect rates used on schedules.

Prepare early for ICS to avoid a deadline crisis

The ICS deadline and preparation can be overwhelming for GovCons – those recently established or even seasoned organizations – as they prepare for reporting. It takes expertise in the requirements for filing, knowledge of deadlines and extensions, and an understanding of the consequences of non-compliance to minimize the risk of a full DCAA audit.

That’s where we come in. Our team at WJ Technologies knows the ins and outs of the ICS and offers services and support to ensure GovCon compliance – giving you peace of mind and saving you valuable time. To learn more contact us today, Kris Fitzgerald at WiJiT (kris.fitzgerald@wjtechnologies.com).

This process will work for any screen that contains a table view of the information. The example that we will be using is the Manage Accounts Payable Vouchers screen.

You should have Costpoint open to run this process.

Step 1: Open the Manage Accounts Payable Vouchers screen.

Step 2: Fill out the header information as you normal would when manually keying in an AP voucher:

Step 3: At the bottom of the screen, where the AP detail table resides, press the “New” button. This will open a row in the table:

Step 4: Highlight the first row, and press CTRL-C:

The “Copy To Clipboard” should appear:

Note: Depending on what browser you are using, you may need to press CTRL-C twice to copy the information in the above screen.

 Step 5: Open Excel, and press CTRL-V. The information from the row that you copied should appear in the spreadsheet:

Tip: If you have existing AP vouchers, do a Query and pull in one that has already been entered. This will help with filling out information in the spreadsheet. An existing voucher row will contain the system required information for each field which you may not know is required. You can use this information and change it if necessary.

Step 6: Fill out the spreadsheet with the appropriate information for this AP voucher. Things such as the G/L account, Project, Org, and Total Amount may be required for this vendor.

The results for the spreadsheet will look like this:

Step 7: Highlight all rows that you want to upload, EXCLUDING the header row, and press CTRL-C.

Tip: Make sure to copy all columns that contain a value in the header, even those that do not have any data.

Step 8: Go back into the AP voucher screen in Costpoint, and put your cursor in the first field:

Note: there may be a “1” in that field. Put your curser over the number 1

Step 9: Press CTRL-V. The information from your spreadsheet will populate in the table:

Step 10: Modify the information (if necessary), and press Save.

Note: It is VERY IMPORTANT to keep the order of the columns when first copying the same as when you paste the information. Any changes to the column order will result in inaccurate or incorrect data uploading.

This process is available for any screen that contains a table. For example, you can use this to:

• Set up your Chart of Accounts
• Load Account/Org links
• Load information into Open Billing Detail
• Set up new Projects
• Load Employee Master File information for new hires

For other Tips and Tricks on using Costpoint, contact Kris Fitzgerald at WiJiT (kris.fitzgerald@wjtechnologies.com) to find out how we can help.

This framework is meant to hold contractors accountable for their security system requirements. The CMMC pilot program (CMMC 1.0) was assessed in March 2021 and resulted in updates to the structure and requirements to streamline and improve the program.

The assessment included more than 850 public comments and feedback from industry, Congress and other stakeholders, which helped drive the response to:

1. Reduce costs, particularly for small businesses.
2. Increase trust in the CMMC program.
3. Clarify and align cybersecurity requirements to other federal requirements and standards.
4. Cut red tape for small and medium-sized businesses.
5. Set priorities for protecting DoD information.
6. Reinforce cooperation between the DoD and industries addressing cyber threats.

CMMC 2.0 will implement program changes after it completes the rulemaking process, which could take 9-24 months. GovCons will be required to implement cybersecurity protection standards, perform self-assessments or obtain third-party certification as a condition of DoD contract awards.

CMMC 2.0 reduces cyber-security from five to three:

Level 1: Foundational

Level 2: Advanced

Level 3: Expert

Who does CMMC 2.0 Impact?

The rule applies to defense industrial base (DIB) contractor’s unclassified networks that process, store or transmit FCI or CUI.

“DoD’s intent under CMMC 2.0 is that if a DIB company does not process, store, or transmit Controlled Unclassified Information (CUI) on its unclassified network, but does process, store or handle Federal Contract Information (FCI), then it must perform a CMMC Level 1 self-assessment and submit the results with an annual affirmation by a senior company official into SPRS.”

What’s at risk for GovCons?

Companies should be proactive in continuing to build and maintain compliance programs, evaluate and harden their cyber-security while the rulemaking process continues. The Department of Justice’s Civil Cyber-Fraud Initiative will be focusing on GovCons that fail to comply with cybersecurity standards.

WJ Technologies helps GovCons stay on track and in compliance. Contact us for more information.

To be ready for a new year, we make sure best practices are followed – and that involves making lists and checking them twice. Checklists keep us on track and up-to-date with requirements at the end of the year.

This year, we found a checklist with an interesting graphic showing the concept of the 1-10-100 quality principle to prevent the cascading effect of small issues becoming catastrophes. This applies perfectly to the critical step companies should take to clean up their data each year. Cleaning up the last 12 months of data keeps businesses from making decisions using bad information.

Source: Validity

Starting a new year with cleaned and accurate information prevents an inaccuracy snowball from turning into an avalanche later. Clean and accurate data, like inventory, vendor lists and billing information prevents delays, regulatory breaches and poor overall performance.

You can feel confident that your choices and plans are built on the truth when there are no duplicates, errors or inconsistencies in your data. It streamlines searches and prevents frustration.

According to market research company AI Multiple, data issues arise due to technical problems such as:

• Synchronization issues: When data is not appropriately shared between two systems, it may cause a problem.
• Software bugs in data processing applications: Applications can write data with mistakes or overwrite correct data due to various bugs.
• Information Obfuscation by users: It is the concealment of data by purpose. People may give incomplete or incorrect data for a variety of reasons.

WJ Technologies works with Unanet, Deltek and Jamis – software companies that inherently provide some key components for having clean data. One is increased controls on inputs, which ensures cleaner data is being used in the system. Another is the ability to highlight and resolve faulty data before it becomes problematic.

While the software helps with data issues, it also helps to hire a firm to professionally clean your data. If you find yourself in need of expert advice during your year-end close, reach out to us – we’ll help fix issues now to save you time and money later.

WJ Technologies is a leading provider of accounting software and services for Government Contractors. We tailor our services to meet your company’s needs offering accounting systems consulting, software evaluation and decision support, accounting services, staff augmentation, training, and government contracting services. Contact us to learn more about how we can help you!

WJ Technologies is a leading provider of accounting software and services for Government Contractors. We tailor our services to meet your company’s needs offering accounting systems consulting, software evaluation and decision support, accounting services, staff augmentation, training, and government contracting services. Contact us to learn more about how we can help you!