Getting Ready for January 1st
The end of the year is filled with holidays, gifts, and parties. If you are a GovCon small business owner it’s also filled with wrapping up the current year’s finances and getting ready for next year. The importance of closing, rolling forward, and opening fiscal years can suck all the fun out of the holidays – unless you are prepared. While we can’t help you pick out that perfect gift for Aunt Harriet, we can help take some of the stress out of the holidays by providing a year-end prep checklist so you can check off year-end actions for your GovCon, as you check Harriet’s name off your gift list.
Out with the Old …
Closing out the year entails wrapping up billing your customers, as well as recording and paying vendor invoices. The goal is to get good cut-off for revenues and expenses to ensure the accuracy of net income on your P&L. This feeds into calculating your actual indirect rates for the year to see how close you were to your forecasted rates. For your cost-type work, it also means determining whether you owe money back to the government (for under-running rates) or whether the government owes you (for actuals in excess of target rates). As you can see, there’s a lot going on. Here’s what you can do to prepare:
- Review your company’s invoicing schedule. Have you billed for all milestones as well as the recurring monthly invoices?
- Scrub the vendor payables list. Are all recurring vendor invoices posted? Do you also have those quarterly and annual invoices recorded?
- Credit cards. If it’s charged, it is considered paid. Record that activity!
- Make your estimated tax payments on schedule, keep track of the items your CPA always requests, and you should be good to go.
- Cut-off and completion are key – keep lists and check off as complete!
In with the New…
There’s just about as much to do to get ready for the new year as there was to close out the previous year. Much of it centers around having a plan in place – for corporate initiatives, corporate goals, and corporate finances.
- Strategic Planning – Reviewing and updating each year will help you identify strengths – and weaknesses – in your GovCon. If you don’t have one, develop one. Period. The best practice is a 5-year plan. The plan for next year is critical. Everyone understands that years 2-5 get progressively softer, but developing goals, with feedback and buy-in from the executive management team, will help keep everyone’s eye on the ball.
- Budget, Budget, Budget – While it may not sound like fun, without one, your business is running blind. Start with a top-down if you must but bottom-up is better … use that strategic plan for next year to schedule an estimate of contract revenue and associated direct costs. Next, estimate what it takes to support your forecasted revenue base framing costs as fringe, overhead, or G&A perspective… how many HR personnel will you need, is it time to refresh your IT inventory, are you ready to hire that new BD resource … you get it! Wash-Rinse-Repeat until the budget makes sense and is attainable. Stretch goals are good to have, but the entire budget shouldn’t be based on them.
- Review Company Policies – Now is also the perfect time to review and make updates to things like the holiday schedule, planned 401k match, and other benefits that may impact attaining the strategic goals and play into the annual budget.
- Wrap Rates – The next step is to use the budget to develop target indirect rates (wrap rate). You’ll need them for bidding, too. And don’t forget about DCAA approval as appropriate.
- Cash Flow – You are finally ready to flip the budget into a cash flow model ….schedule the timing of customer receipts and when payroll and other vendor payments will hit the bank. This will help you plan the timing of discretionary corporate investments that are part of the strategic plan.
Anything else? Registrations, of course!
- Review business registrations to be sure your company has registered everywhere it should in order to conduct business.
- SAM – Is your registration current? If you are not active, you are not eligible for new awards.
That was a lot of info, but being prepared will make it easier to get through year-end for your GovCon. Feel free to reach out to anyone at BOOST if you have any questions about closing out the year or planning for the next. Planning may not make it any easier to stomach Aunt Harriet’s fruitcake, but it should help you sleep better on December 31st, knowing your GovCon is in good shape and ready to take on the next year!
About The Author, Aimee Hollenhorst
Aimee Hollenhorst is a CPA with over 30 years of experience providing auditing, consulting and compliance support to Government Contractors. She is a BOOST CFO consultant who before joining BOOST, helped navigate three separate successful acquisition transactions.