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Mid-Year Accounting, What You Need to Know!

It is mid-year planning time, and our Accounting Team would love to share with you a few items that should be on your radar. We are here to help you succeed, and we are committed to Quality, Proactiveness, and Communication.

Let’s jump right in!

 

  1. Budgeting and Forecasting – Budgeting and Forecasting are very important to track projected gains or losses. A few items to think about: Are you forecasting quarterly? If not, you should! Ensuring full visibility on how your projections are going against actuals is extremely important for stability and planning for growth. Additionally, if your 2021 budget is not trending upward as expected, you need to know why, and what is causing the variance. For 2022 budgets, August and September are the perfect months to start planning before the end of the year rolls around and you are scrambling to get one set up.
  2. Pipeline – Planning for growth requires a lot of effort, specifically creating a healthy pipeline. Make sure you keep on top of your projections as well as your win strategy. Review your pipeline no less than bi-weekly. What changes are needed to ensure success? Do you have the right partnerships/subcontractors? Are there any events occurring that would put you in the game? Are you marketing to the right people? Do you have the right credentials needed to win more work?
  3. Pricing – This is a big one. When was the last time you reviewed your pricing? Are you competitive enough? If you do not feel comfortable with your pricing, now is the time to take action. In the govcon space, you cannot afford to be asleep on the wheel. Taking a proactive approach to monitor your pricing and make adjustment is a must.
  4. Accounts Receivables – Cash is KING! How is your AR trending? Do you have a lot of uncollected cash sitting in your 60-90 days aging? It is imperative that you review your AR monthly, and if in a cash crunch, review it weekly. Keep on top of sending collections reminders and make it very easy on your clients to make payments, whether that be offering ACH options or a 3rd party service like bill.com. Bottom line is to make it extremely easy for them to pay.  Additionally, do you have amazing clients that pay promptly? If so, and if your company can afford it, offer an incentive or discount for prompt payments! Relationship building is key to the success of your business.
  5. Accounts Payables – On the contrary, are you paying your vendors extremely fast? Are you seeing your AP aging is less than 30 days? It is important to know how these quick-pay behaviors impact your cash. It is ideal to keep vendor agreements to 30-45 days, and only priority vendors as less than 30 or pay upon receipt. It is a great time to review your vendor payment terms and renegotiate if needed.
  6. Vendor Analysis – How long has it been since you last negotiated payment terms with your vendors? When was the last time you looked at your priority vendors to ensure a mitigation plan is in place should such vendor cease to exist? When was the last time you rated your vendors performance, quality, and services? This is the perfect time to put thought and energy into these pieces!
  7. 1099 Preparation – Do you have W9’s for all qualified vendors? 1099 submission deadline is right around the corner (end of the year) and taking a proactive approach to ensure you have all W9s would ensure compliance. If you find you don’t have W9’s, reach out to your vendors now and give them plenty of time to reply with one. Create a folder to keep track of them, or make sure to upload them in your accounting system. Additionally, you should have them marked as 1099 in your system for reporting on the total value paid. If you have paid a vendor more than $600, they will need a 1099 from you. Other considerations should be taken into account, however, it’s best practice to ask for one from all your vendors and keep records of such requests. Any vendor not complying, make sure to note that too.
  8. Indirect Rate Monitoring – When was the last time you looked at your actual monthly indirect rates and compared them to your company’s provisional billing rates? How are you trending? Have you had material change and need to submit a revised incurred cost submission? All things to consider before the end of the year.
  9. Salary, Wages & Bonuses – Have you heard of “The Great Resignation”? This is the time to review your employee’s performance bonuses, wages, and payouts. Are you competitive enough for the current job market? If not, this is the time to do a quick check for end-of-the-year bonuses and raises! How is your benefits plan matching up to your employees’ expectations? Do you need to set up a 401K matching program? Reach out to your HR representative to ensure the best benefits package is being offered, and if not, what changes are necessary? Cost-benefit analysis is key here to ensure your return on investment (ROI) is worth it.
  10. Policies and Procedures / Handbooks – Your Accounting Policies and Procedures manual should be up to date, however, if not, this is the perfect time to review and make sure it is. Do you have segregation of duties? Are you in compliance with all govcon regulations; how about GAAP? Is it documented? What is your capitalization policy? Additionally, do you have a corporate handbook that you need to revise? This is the time to make sure all your ducks are in a row and it’s well documented. Policies for HR, IT, Accounting, et all need to be in place.
  11. Tax Strategy – Have you had a mid-year tax planning with your CPA? If not, this is your friendly reminder to reach out to them ASAP! Are you making estimated quarterly payments? Are you trending a high net income and need to plan for additional expenses before year-end? Do you have any capital expenditures on hold that need to be re-evaluated? Lastly, have you made sure your 2020 tax filings have been processed and submitted due to an extension? Any changes in equity? Mergers and Acquisitions are also a hot topic this time of the year – valuations are well underway.
  12. Legal Entity Re-evaluation – Make sure that the business structure you have is the right one for your legal needs. If you are not sure, reach out to your Tax CPA and ask! Additionally, make sure you know the legal implications of any changes should you decide to make one. Do not forget, an unfortunate event can occur at any time, and you need to be prepared. Make sure you have a succession plan and or a trust set up if anything should happen to you or a business partner!

While we are positive that we provided you a lot to chew on, BOOST also has the SMEs to back it up. If you’d rather have a conversation to dive deeper into any or all of these pieces, reach out to our accounting team at [email protected]. We’re ready to help get your books locked and loaded for your next phase of growth.

 

ICS | DIY or Do It Well?

While Tax Season may be the bell of the ball for the average American, in the GovCon space the real sweetheart is the Incurred Cost Submission. The question on our client’s minds is: Can you DIY the ICS with some turbo-tax-type setupor does it need to be carefully placed into the hands of a professional? Keeping that in mind, let’s discuss:  

Incurred Cost Submission Must-Knows 

Filing Deadline: Your ICS must be filed 6 months after the close of your fiscal year. For many, that’s June 30thThough that may seem far from today, the amount of QA (which we’ll get to shortly) necessary to facilitate and close this filing leaves little wiggle room.  

Schedule H Detail: Providing minimal detail or justification for costs isn’t going to cut it here. We typically say that with the government, ignorance isn’t an excuse, and with your ICS that holds true. You’ll need to provide adequate reasoning for the costs as they pertain to each line item on your submission.  

Running Reports Isn’t Enough: The running of the report is step one in the process. From there you’ll need to match and checkpoint of contact, accounting, and contract data (to include task order changes) to ensure that everything matches and balances. This is where the bulk of your time will be spent, and it is also why we harp on having your processes, filing, and organization in place for future needs.  

The DIY Approach 

If you’re planning to DIY (Do-ICS-Yourself) you’ll need to begin gathering your data ASAP. Is it possible to DIY the ICS? Absolutely. Do you have the dedicated time and attention to get it right? That’s up to you. When it comes to the mathematically minded let’s put this to a quick equation 

Your Time Per Week  

Contract and Client Deliverable Time + ICS Prep Time + BD Time 

If we’re looking at a negative number, or one that robs you of sleep, DIY may not be your best bet. If you’re set on the DIY method here are some of the things you’ll need to remember:  

• Know the DCAA Workbook (ICE) and Requirements well (No, this isn’t an optional filing)
• Match schedules to unlinked data
• Categorize for Schedule H
• Include and complete all mandatory schedules
Include appropriate wage accounts
• All Policy Documents Readily available (Accounting Policies, Bonus Policy, Labor & Timekeeping, etc.)
• Have direct access to task orders and contracts, and correct figures for all schedules
• Run your report
• Set aside time to double and triple check the data outputs
• Check the DCAA Adequate Checklist

How To Do It Well 

If the DIY method looks too overwhelming, we have a suggestion. This should come as no surprise, but you may want to pass the ball to an outsourced option that can help you to prepare for submitting your report. An outsourced team will have fresh eyes to compile, prepare, and check your submission prior to crunch time. The goal here is to provide your ICS in a way that the DCAA will deem it “adequate” AND low risk to avoid an audit. While most preparation services cannot guarantee these ratings and future audit avoidance, having your DCAA ducks in a row will definitely give you an educated leg up in the pool.  

BOOST can help prepare your Incurred Cost Submissions with a keen eye for detail and reporting. If you’d like to learn more about this service, schedule a chat here 

Top Tips for Choosing an Accounting System

As we discussed previously, accounting implementations are like dentist visits (sorry dental friends), necessary but definitely not fun. Yet, before we get to the implementation part, we have to go through the process of system selection; identifying and choosing the best system for your business.

We’ve compiled what we consider to be the top tips for choosing your new system.

  1. Have a team to evaluate your options.
    The minimum number of systems you should be evaluating for implementation is three. We’ll say that again: Evaluate a minimum of three systems (but probably no more than 5) to find the best fit for your company. This means you will need a team of people from your company who understand your business processes and the nuances of your business needs to take part in the evaluation. The key stakeholders in the decision to implement a new system are:

    • Executive Leadership
    • Accountants
    • Project Managers
    • IT Admin (hosting/software)

Including people from all of these stakeholder categories will ensure that (hopefully) all needs are met when choosing a new system.

  1. Choose an End-to-End system.
    Your accounting system, once implemented, should provide you with visibility, clear reporting, and above all more time spent on BD and other tasks instead of transaction processing. The reasons you’re moving away from your previous systems are typically due to the lack of visibility, lack of streamlined processes, and increased transaction volume. These are not issues you want to bring with you to the new system. We’re looking to ease tensions, reduce integration points, and gain efficiencies through automation of end-to-end transactions.
  2. The user experience should be intuitive.
    End users of the system should be able to navigate within the system without intense training. It should be configured with automated controls that reduce the need for redundancies that manual controls create. While each system has its own way of doing things, for the most part users should feel that the processes they’re using fall in line with their current routines versus creating something completely new.
  3. Choose a system you can configure.
    The best system is one that you can take directly off the shelf and implement with minimal configuration. You’re not looking to redesign or customize a system to fit each piece of your business. Rather, you need something that will fit into the slot and fill the needs that were identified within your previous system. The name of the game here is plug-and-play for the most part. If you’re finding that during your discovery phase, the questions you’re asking are how to change, manipulate, or redesign the system or the system provides solutions for less than 80% of your business, that system probably isn’t the one for you.

Above all, your accounting system should work with and alongside you. In an ideal world, it will be able to grow with you for a time as well. Choosing a new system should not be taken lightly and if your executive and accounting teams need guidance through this process, we would be happy to assist.

At BOOST, we thrive in helping clients to identify needs, find solutions, and get more time out of the system and back into the billable day. We’ll dive deeper into the discussion of Transitioning Systems in our July 7th webinar. Find more information regarding this digital event and register here. If you’re ready to find a new system now, contact our Managed Accounting Experts here.

Navigating Complexities | The CARES Act and 3610 Guidance for the Intelligence Community

Guidance for the Intelligence Community is always changing. Yet currently those changes seem to be in hyper-drive. Luckily, we have experts like Amy Hernandez at BOOST LLC and partners like Pete Ragone from the SC&H Group to help us navigate these waters.

In an information-packed hour-long virtual discussion, Amy and Pete walked attendees through the top questions (and answers) they’ve received regarding this spring’s pressing changes as they pertain to the Intelligence Community. Below, you’ll find some of what they discussed. For the full discussion, please visit the webinar replay here.

Where do we stand in regard to PPP/Tax Credits vs. Class Deviation 3610?
Questions and dilemmas abound. Amy & Pete advised clients in the intel space that they may be able to invoice regarding lost time. Many contractors wanted to apply both the PPP Loan and the Class Deviation 3610. Yet, the CARES Act  did not fill the gap of March 13th-March 27th (as of May 28th) when many contractors were suddenly not able to work at their assigned location in support of Government programs.  Unfortunately, you are unable to invoice under 3610 and take the PPP loan or tax credit. It’s one or the other. If you take the tax credit or PPP, you won’t get 3610. But stay tuned, this could be modified as updated guidance related to the CARES Act is released in the coming weeks.


What key guidance has come out relating to 3610?
Key guidance posted on May 18th includes an overarching implementation guidance and checklist (with instructions). The guidance references that contractors can be reimbursed at their bill rates, which include profit. However, companies have to certify costs without profit for reimbursement.  When seeking reimbursement, contractors are effectively having to disclose profit to the government and primes. Those without cost-plus contracts may not have fully-FAR-31-compliant cost accounting systems (which best practice says you should). In the long run, this may change the landscape for the IC in billing and proposals going forward due to the fact that 3610 is only reimbursing costs for 2020. The worry is that in the next option year negotiations may be adversely affected, given that companies invoicing under 3610 have now informed customers/primes what their profit is on individual labor rates.

What are the cost accounting implications of invoicing under 3610?
If you’re having to track costs by contract, you need to make sure you have a separate time charge/leave code for COVID Leave or however you’re tracking work changes due to the pandemic. Most banks are sending PPP funds to a separate account, to assist with tracking as everything needs to be specifically tagged in regard to these funds. If you’re able to invoice under 3610, leave recorded as fringe costs do not stay as fringe, they need to be reclassified as direct labor once invoiced. We repeat, once you invoice it is no longer fringe, but a direct cost under that contract. Those costs can only be billed under that contract, by FAR definition it becomes a direct cost. When calculating your indirect cost rates, ensure that COVID costs invoiced under 3610 are removed from the fringe pool. (Check out the video for some of the more in-the-weeds, guidance for your chart of accounts.)

What are potential future contracting implications once things return to “normal”?
Depending on the funding of certain programs, there may be more limited additional 3610 availability. They will be funded but increases to contract funding will need to be priced out and supported. Short term, the government will continue with current spending habits as the debt ceiling raises. In the long term, there may be some tightening of funding on the horizon. Be prepared for a higher likelihood of justification for pricing going forward. To prepare, document, document, document. This exercise requires businesses to have elements of a compliant accounting system.

Action Items:

  • Have a good, clean accounting system.
  • Determine your financial health by contract and your business as a whole when deciding which funding/opportunities to take.

If you find yourself looking for additional guidance, a resource for implementing compliant accounting systems, or other questions regarding the most up-to-date released guidance, let’s connect. Our BOOST experts can get the information you need or connect you with our smart partners, like Pete, who have a breadth of knowledge in these areas.

SF1408, What is it? Why is it important for you?

Letters, numbers, acronyms, and more. It’s like a GovCon fairytale minus the lions, tigers, and bears. Oh my!
Today we’re discussing SF1408. What is it and why is it something you should be familiar with?

A 1408 assessment is the Pre-Award Accounting System Survey (SF1408).  The Accounting System Survey is sometimes referred to as a “pre-award audit” and it is necessary for the award of any Cost Type contract.

A few points to note:

This comes BEFORE contract award.
Imagine losing a bid because you didn’t have your act together in your financials!

• This is not an audit.
They (DCAA) focus on your accounting system’s ability to be compliant if you were to receive the award.    It is simply a review to determine if your system is set up and operating in accordance with the criteria on page 2 of Standard Form 1408.

This is where policies and procedures rule (Here’s a tip: an accounting system is not just the software being utilized).
DCAA is looking for you to document what your system does – think segregation of indirect vs. direct costs and unallowables (our favorite); how are costs captured and classified?; how and where do you charge your time?

If you plan on priming this year on a Cost Type contract or are awarded a cost type subcontract (looking at you DOD peeps!), make sure you are prepared with documented policies and a compliant accounting system.

Note that this is different than an Accounting System Audit!  An audit of your accounting system is much more in-depth and includes tests of internal controls (e.g., segregation of duties, etc.).  Know what you need when you read through the RFP.  If you have a question, ask the COR during the Q&A time – the difference between the two is huge!

Do you still have questions or want to discuss this as it pertains to your business specifically? Contact us here.

BOOST Accounting

 

Connect with BOOST to discuss how we can help with your accounting initiatives. [email protected]

Introducing BOOST LLC

BOOST was founded to support GovCons as they get to the next level. After reinventing the wheel many times and banging our heads against numerous walls, we have learned what works and what doesn’t. We love working with executives who want to see their organization grow and who value advice from those who have “been there, done that.” We want our small clients to outgrow us. We want our large clients to use us when they need us and then call us back for the next project. We want you to sell your business for the multiplier you want. We want you to be successful.

www.boostllc.net

Don’t Close the Door on Your Accounting

So, you are a small GovCon, living on a wing and a prayer.  You are bidding on a ton of proposals, winning some work, growing, adding employees, and maybe making a small profit.  When you are small, growing is a grind and it’s fun (thinking this keeps us sane!). Sometimes, you might close your eyes and keep your fingers crossed that your back office, especially accounting, is just running itself. It’s like your teenager’s messy room; you just close the door so you don’t have to look at it.

Trust us, we have seen our fair share of companies who have closed the door on their accounting. Here are just a few of the top examples of accounting mistakes we have seen.  (At least the ones that we can write about.)

  • Bank account balance accounting – Are you running your business on your bank account? Are you thinking “Hey, I’ve got enough money in my checking account to make payroll, all is good”. Short answer: It’s not.  On this system you can’t run your company effectively, pay taxes, be compliant or scale your company, simply by checking the bank account balance.
  • Forgetting to record small transactions – You need a good chart of accounts that is GovCon compliant, with explanations as to what gets recorded where. Then follow it.  All transactions need to be recorded. This includes those monogramed golf balls you thought were a great idea, or the wine tasting that was a “team building activity”.  Don’t be lazy and just enter something as a general journal entry.  Be specific, do the work and your books will look a lot better.
  • Make a budget – It takes time, but it’s a must do. You have a budget for your personal life, right?  Well, maybe not if you are also running your personal life on bank account balance accounting.  You need a corporate budget to plan and track.  Assign budgets for each project/contract as well.  Track funding, track burn rates and learn where you are missing or making the mark.  Do this routinely, we suggest quarterly as well as annually.
  • Doing it all – It’s okay not to know much about accounting. Really, we think you are fabulous and have amazing strengths. But, own the fact that you don’t know accounting and outsource it!  Accounting is not an area where you should use shortcuts or be cheap. Outsource your weaknesses and free up mind space for business development that will help you grow your company.  The risk is too high to find out otherwise.

 

We have all closed doors and tried to ignore things that look scary.  Accounting is just not one of these areas where you can afford to do this. Contact BOOST if your accounting is messy and needs a good clean up.  We can help you clean the room so you can keep the door open!accou

Budget: Preparing for FY19

As GovCons grind through the rest of the year, it is hard to think about 2019.  We’re a little worn out from proposal season and if you are lucky, new contract awards.  We’ve been recruiting hard in a difficult market, transitioning from incumbents, and getting new starts off the ground.  Depending on which agency you work with, you’ve had an upswing in work or you’ve spent most of the year trying to help your clients scrape together budget and “do more with less.” (Is anyone else sick of hearing this?!)  Some may be putting the finishing touches on their OASIS bid or hunting a few of the large elephants out there (JEDI subs, CMS PEO, etc.). Not sure about you, but we’re ready to start the holiday party networking scene and drink and eat away our cares.

While that may be tempting, now is the time to plan for FY19.  Corporate budgeting season should be well underway.  What are your goals for next year and what are your priorities?  What can you divert investment to and what do you hold off on?  We all have our wish lists of things we’d spend money on, but what has the best ROI for your company?  In our capitalist hearts, money drives all things…which is why the budget is so important.

If you have the attitude that the budget is just an exercise for accounting folks or it is just a spreadsheet drill, you are missing the point and the opportunity to align your company under a set of consistent goals.

Best practice has budgeting from both top-down and bottom-up approaches.  CEOs – what are your goals for next year?  Some folks think too small, while others pull a random number out of their ass and demand that BD/Capture/Ops get them there.  Some take a % increase off of the current year.  There is nothing worse than sitting in budget meeting after budget meeting listening to what the “stretch” goals should be.  Unrealistic and completely unattainable goals will demotivate a sales team faster than anything.  That being said, a goal shouldn’t be easy street either.  Take a cold hard look at your pipeline report.  Look at your customer’s budget. Do the environmental scan.  Don’t make up a number in a bubble.

From a bottom-up approach, take a good look at actual run rates, utilizations, and project budgets.  Review indirect costs for efficiencies.  What did you waste money on this year?  What led to no ROI?  Now’s the time to cut it or reevaluate for next year.  Ripe off the Band-Aid and make tough decisions.

Finally, tie the budget directly to your corporate goals.  Tie performance evaluations to goals and budget.  Then effectively communicate the goals and any changes to everyone so there is an understanding of where the company is going, company priorities and how each individual can contribute to those goals.

Or, if you would rather stick your head in the sand, a la the ostrich, there are always holiday parties to attend. Let us know how that works out.

 

BOOST can show you how to go back to the basics – pay your people and get paid. From there we can set up a monthly financial review meeting to analyze all financial aspects of your business. BOOST reviews your system with stakeholders and documents operational procedures. We help provide a structure and organize effective accounting systems that scale with your growing business. Let’s get you on the right path for FY19, today! [email protected]