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March 3, 2023
JumpStart Your GovCon Accounting System – Getting Accounting Help
Written by: Ron Lewis
This blog discusses how utilizing managed services powered by a modern ERP platform, and supported by a government accounting SMEs, helps federal contractors set up a DCAA compliant accounting system. Whether you're a startup whose just received your first SBIR grant or an established prime contractor, just receiving your first cost reimbursable contract, we'll guide you through the process of selecting the right kind of accounting help needed to implement a DCAA compliant accounting system. We describe the benefits of utilizing managed services, powered by OneLynk. And staffed with the right accountant can provide a significant jumpstart.
Managed Services - Getting the Accounting Help You'll Need
When you think about accounting and audits, you probably think about needing a CPA. In general, CPAs are licensed individuals who are educated in accounting and are well-versed in Generally Accepted Accounting Principles (GAAP). Today becoming a CPA generally requires a Masters' degree, passing a multi-day uniform exam and at least two years of public accounting experience.
GAAP is the underlying set of requirements that is used to produce financial statements. GAAP financial statements are used internally by management in making short and long-term decisions and improving business performance, and externally by investors and creditors in making investment and lending decisions. GAAP provides guidelines on accounting for routine and non-routine transactions such as revenue recognition. A strong understanding of GAAP is fundamental to government grants and contract accounting.
the The Internal Revenue Code is a framework for corporate and individual income tax regulators who may have prepared their annual tax return. It is critical to a business. Because of this, management of GovCon firms frequently turns to their CPA first. Tax knowledge, however, is almost completely irrelevant to working with the cost accounting standards of the Federal Acquisition Regulations (FAR) and Cost Accounting Standards (CAS). Too often, federal contractors that are new to government contracting make the mistake and assume a CPA with little or no government contracting experience can implement a DCAA compliant accounting system. This can be a costly mistake!
What Type of Accounting Support Do You Need
Whether you decide to outsource your accounting or do it in-house, there are expenses involved. Accounting compensation is driven by years of experience, specialized knowledge, certifications, and location. A critical factor that is often overlooked is - the accounting resource must have prior government cost accounting experience.
Below you'll find salaries for various accounting positions based on www.salary.com median pay ranges. If you want a super star, be prepared to pay in the 80th-90 th percentiles. Depending on your location, these amounts need to be adjusted up or down based on the cost-of-living for your location. If, for example, you are in Boston and want someone to be on site, be prepared to add 30-40% for a cost-of-living adjustment.
Additionally, if you fill the roles list below with an employee, rather than a consultant, budget an additional 25-35% for benefits - the exact amount depends on how generous your benefits package needs to be to find qualified resources.
Bookkeeper and administrative types with associate degree are usually paid $40-$60 per hour depending on experience. A bookkeeper can be all that is needed for a business with revenues of less than $5M. For most of our clients of this size, at least 2 to 3 years' experience doing bookkeeping for a GovCon firm will be essential.
Accountants with a bachelor's degree in accounting become more appropriate when the volume and complexity of transactions within the business increases, typically $5-$10M per year. Salaries can range from $100,000 to $120,000 per year, plus benefits for this level of experience. However, the complexity of any commercial business and the need to interact regularly with customers, VCs, or board members could challenge this level of expertise in smaller businesses.
Controllers are usually degreed accountants with five to seven years of experience. Salaries range from $120,000 to $150,000 per year. These individuals typically become essential when revenue hit $10M or demands of customers, VCs, boards require a high level of skill and interaction.
Chief Financial Officer (CFO) are required for publicly traded companies or companies with significant outside investor relations and board oversight. Salaries for CFO can range from $150,00 to $225,000 per year, plus benefits. CFOs typically have 10 to 15 years of related experience.
Do You Have the Right Kind of CPA
Government contract accounting is a rare specialty that is outside the realm of knowledge of an ordinary CPA. It is not something an accountant would learn in school, nor is it covered in the Uniform CPA Examination.
At AtWork Systems, we offer an accounting solution as well as managed services that provide the full range of accounting support. Our managed services are provided by CPAsqualified ro helpo and bookkeepers with both public accounting experience and hundreds of hours of government accounting experience.
How To Tell if Your Accountant is Qualified to Handle Your Needs
While knowledge of GAAP is the baseline for applying the specialized rules of the FAR and CAS, it is only the beginning. There are many nuances to FAR accounting that can only be learned by working in the trenches. To determine if the person overseeing your financial relationship with the federal government is qualified, here's a few questions you need to ask them:
- How do you establish an annual operating budget?
- How should we establish provisional/target indirect rates?
- What do we need to have in place to be ready for a pre-award survey?
- How do the indirect rates we use in our proposal compare with our competitors?
- Do you know what the salary cap is for the government agency who awarded us a grant or contract?
- What process or system would you put in place to help in avoiding over-running our provisional rates
Yes, there are all sorts of competent individuals who do accounting that can help you with your business. The question you need to ask is, are they qualified to help you manage your government grants and contracts accounting.
What services should your Accountant be able to provide?
Typically, a managed service provider provides a list of accounting and payroll services needed to maintain the contractor's books. Exactly what services should be provided?
The list below provides a summary of the types of accounting services that should be provided:
- Perform the setup of new customers, prepare the monthly billing and meet with customer's management to review and remit the approved invoices to customers.
- Perform the setup of new vendors, assist in the selection of invoices to be processed for payment and meet with customer's management to remit approved invoices for payment.
- Each month reconcile customer's checking accounts with the bank statements for proper account balances and to identify reconciling items that may require adjustments to their books and records.
- Make adjusting entries directly into the accounting system and identify the source of each adjustment. Customer's management is responsible for reviewing and accepting the adjusting entries and understanding the nature and impact of these entries to their books and records.
- Reconcile credit card statements, and loan balances using information customer provides.
Upon completion of all reconciliations and posting of adjustments, meet with customer's management to review management reports to discuss actual vs expected performance, corrective actions, open items and or alternative strategies.
The list below provides a summary of the types of payroll services that should be provided:
- Record the payroll and taxes as calculated by your payroll service into and reconcile to the monthly or quarterly reports.
- Make payroll tax deposits or prepare payroll tax returns. You and your payroll service provider will be responsible for payroll calculations, returns and deposits.
- Customer is responsible for communicating with their chosen payroll service regarding payroll tax matters.
- If Customer has payroll tax questions, they should ask their payroll provider.
- If Customer feels that their payroll provider is not providing you with satisfactory service or have made a mistake, please let the managed service provider know immediately so that they can assist you with reconciling or identifying any errors.
The managed service provider normally assumes no liability for the services provided by their third-party payroll service provider.
Learn More About AtWork Systems
AtWork Systems is an Arlington, Virginia based software development company. Its principals have decades of experience doing business with and working for federal, state and local government. They developed OneLynk as a configurable and scalable business operating platform that digitizes and optimizes processes while providing just in time business intelligence for decision making. OneLynk contains a suite of easily configurable web applications for automating and monitoring business transactions, including human capital management, finance, timekeeping and expense management, procurement, contracts and project management, payroll services and more.
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