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Taylor Dean

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4 Small Business Apps That Integrate With QuickBooks

Posted by Taylor Dean on Tue, Aug 28, 2018 @ 09:10 AM

small business owner using QuickBooks app

Millions of small business owners – about 4.3 million to be more precise – rely on QuickBooks to manage their day-to day-accounting. While QuickBooks has earned a reputation for its ease of use, many small business owners don’t realize that with the addition of one or more software applications, they can run their business more efficiently both on the front end and on the back end.

There’s An App for That

There are dozens of applications that integrate with QuickBooks and the list seems to grow by the day.

These apps make QuickBooks more powerful and are designed to help you more efficiently manage the front end of your business. Many of these “helper” applications work in conjunction with a variety of other applications and many are industry specific

Let’s take a look at four apps that’ll help you get more out of your QuickBooks accounting system

1. ServiceTrade

Who it’s for – service contractors

ServiceTrade is field service management application for service contractors. ServiceTrade is a prime example of how you can use an app to improve the front end management of your business. The app helps your customer-facing technicians – who are the backbone of any service business – and your office staff deliver outstanding customer service.

When you use ServiceTrade, your technicians can get real-time access to customer data, schedules, equipment detail and warranties (and much more), all from their mobile devices in the field.

The app helps bridge the gap between your field technicians and office staff. ServiceTrade’s Dispatch Board allows easy access to job details, new appointments, changing schedules and quotes. Your office staff will be able to see the status of service calls and track technicians’ time via a GPS job clock. Your bookkeeping staff will love ServiceTrade since the app minimizes data entry, thanks to its integration with QuickBooks, and makes invoicing simple.

ServiceTrade Dashboard

[source: ServiceTrade]

Want to wow your customers? ServiceTrade allows your customers to go online to see real-time job status, review and approve photos and quotes, and get an after-service report so they’ll understand the value of your services.

2. Acctivate

Who it’s for – inventory-driven businesses like distributors and retailers

While QuickBooks does have a built-in inventory management function, inventory-driven businesses like distributors and retailers can quickly outgrow it. Acctivate offers a more robust solution for better inventory management.

Acctivate is inventory management software that integrates with QuickBooks. The app works for businesses in any industry.

Tracking inventory in real-time as it flows through your business, Acctivate improves communication and collaboration between your purchasing, warehouse, sales, marketing, customer service and management personnel. The robust application can help you improve purchasing decisions; better control inventory; manage sales, order fulfillment and customer service; and see key metrics of your business operations. It allows for just in time inventory management.

Business owners and accounting staff can pull standard and customizable reports to enable more informed decision-making about customers, suppliers and opportunities for improvement. Users can configure graphic-based dashboards to show real-time information on things like inventory levels, sales pipeline, order fulfillment and daily sales.

Acctivate Dashboard

[source: Acctivate]

3. Bill.com

Who it’s for – any type of business

Bill.com digitizes a company’s bill payment process. The beauty of this application is that billing activity automatically sync with your QuickBooks accounting system in real time. This eliminates the need for double entry and reduces the risk of errors. It also gives you a real-time view of cash flow.

For paying and processing your bills, the app allows you to pay bills anytime from any device. You can choose your preferred payment method – you can make ACH payments or mail paper checks to your vendors. Bill.com allows you to customize the memo field and easily see outgoing payments.

Bill.com Vendor Payment

[source: Bill.com]

For invoicing your customers, you can send automatic electronic invoices and reminders. You can choose whether you’re paid by ACH, credit card, PayPal or ePayment.

4. POS Link

Who it’s for – restaurants

This app is for restaurants that are already using Micros or Aloha to record sales transactions. POS Link helps simplify the QuickBooks accounting process by automating everything – from entry to reporting.

For restaurants with multiple locations, POS Link is particularly useful. It allows you to manage all of your locations through a single portal, giving you real-time access to sales, tips, discounts, expenses, gift cards and tax collected

Communication with employees can be a challenge in the fast-paced restaurant business. POS Link solves that problem by allowing you to automatically email a “daily manager report” to anyone on your staff.

POS Link Daily Manager Report

[source: Dataraunt]

Similarly, you can tell POS Link to email alerts to your bookkeeping staff so they know about new marketing campaigns, so they know to track them in QuickBooks. This will give you more meaningful information about which marketing campaigns are effective.

Restaurant owners don’t go into business because they enjoy accounting. In fact, it’s usually just the opposite! POS Link can give your QuickBooks accounting system a big boost by producing a complete audit trail from the sales system to QuickBooks, giving you peace of mind when it comes to accuracy.

Speaking of accuracy, POS Link’s Automatic Balancer can be set to resolve rounding errors. It can also be set to make line items alternate between debits and credits. One thing we like most about the Automatic Balancer feature is that if sales are out of balance, your bookkeeper will get an email alert.

Need Help?

This list of apps is only the tip of the iceberg. Don’t see what you’re looking for? The QuickBooks Apps Store has a full list of apps and allows you to search for apps based on function and business type.

To learn how you can get more out of your QuickBooks accounting system, talk to our Smart Accounting Solutions Support team by calling 800.899.4623 or contact us online.

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Tags: government contractors, Taylor Dean, Smart Accounting Support Solutions, QuickBooks

5 Signs Your Government Contracting Business Might Need a New CPA

Posted by Taylor Dean on Mon, Aug 06, 2018 @ 09:11 AM

new CPA for government contractor

If you are a government contractor, you likely already have a CPA helping you with accounting and taxes. But is the CPA you hired when you started your business still the right CPA for you?

There are a number of reasons why it might be time to consider a new CPA firm. Let’s take a look at a few of those triggers.

1. You’ve grown in size

We see it all the time. A one-person shop managing a single $500,000 contract suddenly lands a big fish – a $5 million contract. Almost overnight, that government contracting business grows exponentially in revenue and headcount. And almost overnight, that government contracting business outgrows its CPA.

Generally, when a contractor hits $5 million in revenue, they see the need to work with a CPA who does remediation of accounting and internal control systems, and who unequivocally understands indirect rates. As your compliance needs get more complex, your need for a sophisticated CPA increases.

An accountant who is well versed in all aspects of government contract compliance can help you identify potential issues before they become problems. That CPA can advise you how to meet the future obligations of your contracts, spot weak internal controls, and address HR issues like benefits and minimum wages and sick leave rules.

Likewise, if your new contracts result in hiring out of state employees, you’ll want a CPA who deals with multi-state taxation.

2. You’ve outgrown your accounting system 

As you grow, you might wonder if your current accounting system can handle your growth and larger contracts, while still being in in compliance.

Is your accounting system compliant? Schedule your free one-hour assessment to find out.

Many government contractors start out with QuickBooks but then outgrow it. However, we find some contractors think they’ve outgrown QuickBooks, but when we take a closer look, we find that it’s still a good fit, but they just don’t know how to get the most out of QuickBooks.

Regardless of which accounting system you use, your CPA should advise you on whether your system is in compliance and whether you are ready to self-certify. Self-certification can be risky for government contractors and therefore it’s critical that you get the right advice on your system’s compliance.

3. You move from a firm fixed price to a cost plus fixed fee contract

If you have a cost plus fixed fee contract, then you can expect an audit by the Defense Contract Audit Agency (DCAA). While an audit sounds ominous, it doesn’t have to be. The key is to work with a CPA who specializes in government contracting compliance, and who can manage the DCAA audit and address any findings.

4. You’re not sure whether you’re in compliance

This is a simple one. If you’re uncertain whether you’re in compliance, then you’re most likely not in compliance. Your CPA should be well versed in all aspects of government contract compliance, including FAR, DCAA, indirect costs, how to ensure that every transaction in your accounting system is compliant, and so much more.

Think of it this way: just when you think you’ve got a clear understanding of one contract’s compliance requirements, you get a new contract with an entirely different set of requirements. It’s hard to keep up. If you have contracts with the Department of Defense and the Department of Agriculture, for instance, your CPA should understand the different rules of both agencies and advise you on how to comply with those rules.

5. You’re not growing

While it might not be as obvious as the other signs you’ve outgrown your CPA, it might be time to move on if your business is stagnant or, worse, if you’re not profitable.

If your CPA doesn’t specialize in government contracting, for instance, they might not be advising you on indirect rates. Your CPA should help you calculate appropriate indirect rates (making sure that you’re bidding a competitive price, but will still make money) and negotiate those rates with government agencies. This, in turn, should help you grow and be profitable.

Are Government Contractors a Good Candidate for Outsourced Bookkeeping?

Yes! There are huge benefits of outsourcing some of your day-to-day tasks. Many CPA firms offer back office support so business owners can spend less time on bookkeeping, HR and QuickBooks, and more time on securing the next big contract.

Government contractors often grow faster than other types of businesses. Landing one big new contract can skyrocket your company’s growth in terms of revenue and employees almost overnight. Growing government contractors quickly discover why it makes sense to outsource their accounting function.

The firm you hire for outsourced accounting can:

  • Review internal controls and policies and procedures.

  • Ensure that costs are being recorded appropriately.

  • Generate reports – like indirect rate reports, project status reports and project costs reports – so you know where you are making and losing money.

  • Offer QuickBooks support.

The list goes on, but you get the idea.

Need Help?

Our Government Contractors Group can help you manage compliance and risk, and help you grow. Contact us online or call 800.899.4623 to discuss your government contracting business.

accounting system compliance checkup 

Tags: government contractors, FAR (Federal Acquisition Regulation), Taylor Dean

3 Traits To Look for When Hiring an Accountant for Your Government Contracting Business

Posted by Taylor Dean on Tue, Jul 17, 2018 @ 08:53 AM

accountant for government contractor

Not all accountants are created equal when it comes to understanding the ins and outs of government contracting. Understanding the compliance issues that encompass government contracts sounds easy enough: cross your T’s and dot your I’s, right? Wrong.

Government contract compliance is akin to learning Arabic. Learning a new language sounds fairly simple, but it’s not. With an entirely different alphabet and grammar rules to learn, it can take years of intense study for an English speaker to master Arabic.

The same goes for accountants who work with government contractors. It takes YEARS of immersion in the world of government contracts for a CPA to master the complex rules and compliance issues that can make or break a contractor. It is an understatement to say that your CPA should have an extremely specialized skill set. Only then can your CPA help you keep your government contracting business in compliance and successful.

Whether you’re looking for a new CPA for your established government contracting business, or you’re just starting out, there are a few key traits to focus on.

1. Expertise In FAR and Indirect Costs, and Knowledge of DCAA

Let’s start with Federal Acquisition Regulations (FAR), indirect costs and the Defense Contract Audit Agency (DCAA). At a minimum, the CPA you hire should:

  • Have a thorough understanding of FAR.

  • Understand what DCAA is and what the agency looks for in an audit.

  • Understand how bids and proposals for government contracts are prepared.

  • Know how to calculate indirect costs that impact your business proposals.

  • Know how to make sure the transactions in your computer system are in compliance with FAR and your contract.

  • Be up to date in understanding revenue recognition and lease accounting rules and how they impact government contracts.

  •  Help you understand the difference between allowable and unallowable costs related to your contracts.

2. Knowledge of Software for Government Contractors

Government contractors work with a variety of accounting systems, running the gamut from QuickBooks, which is a fairly simple low-cost system (and works perfectly well for many contractors), to Deltek and Microsoft Dynamics Navision, which are more robust and pricey and typically used by larger contractors.

The CPA you hire should be able to advise you on which accounting system is appropriate for you based on your size and current and future needs. It is critical that your CPA help ensure that your accounting system complies with all FAR requirements, as well as the requirements of your individual contracts.

Self-certification is where government contractors often put themselves at risk. Contractors must “self certify” that they have an “adequate” accounting system – and correct indirect rates – that are in compliance with FAR. If a contractor certifies incorrect rates, he or she can be criminally charged if they are willfully negligent in applying those rates to a contract. This is where the specialized skills of a CPA can keep you out of trouble (and jail).

Find out whether your accounting system is “adequate” as defined by DCAA.

Pro tip: many contractors are surprised to hear that QuickBooks Online is not a FAR-compliant accounting system. If you have a government contract or grant, your data must be hosted within the United States. That’s where QuickBooks Online falls short of compliance. While the FAR doesn’t explicitly state that this software is not compliant – and that’s why many contractors miss it – your accountant should know this.

3. Ability to See Beyond Compliance: Profitability Is Essential

While keeping your business in compliance is 100% critical, none of that matters if you aren’t profitable in the long term.

Your CPA should help you:

  • Find ways to minimize taxes through tax credits and incentives.

  • Assess internal controls to minimize the chance of employee fraud.

  • Generate reports that show your management team how your business is performing month-to-month and year-to-year.

  • Think strategically long term, since many contracts span a five-year period, and help you project costs when you preparing bid (so you don’t over or under bid).

  • Evaluate your banking and vendor relationships.

  • Understand fixed versus variable costs.

  • Use job costing to determine profitability for a specific component of a contract.

  • Understand the accounting behind indirect costs.

  • Avoid costly timekeeping and reporting mistakes.

Of course, it goes without saying that you want your CPA to return phone calls, emails and texts promptly, meet deadlines, and give solid business advice. But as you can see, specialization is the name of the game when it comes to hiring a CPA for your government contracting business.

What’s Next for You?

Before you hire a CPA, meet with several CPAs and ask for references. Ask those references what it’s like to be the CPA’s client. Also ask for specific examples of how the CPA has helped the client manage compliance challenges and grow.

We invite you to put our Government Contractors Group to the test. Contact us online or call 800.899.4623 to discuss your government contracting business, and explore what you’re looking for in a CPA firm.

accounting system compliance checkup

Tags: government contractors, FAR (Federal Acquisition Regulation), Taylor Dean

SAM.gov Login and Registration Changes for Federal Government Contractors and Grant Recipients

Posted by Taylor Dean on Tue, Jul 03, 2018 @ 07:53 AM

SAM.gov login registration

Government contractors along with grant recipients and managers who use the System for Award Management, more commonly known as SAM.gov, are seeing changes to the free database’s login and registration process.

These changes, implemented by the General Services Administration (GSA), come as a result of alleged fraudulent activity in SAM.

According to the SAM.gov website:

“The measures GSA already put in place to help prevent improper activity in SAM include masking specific data elements in the entity registration even for authorized entity users; requiring ‘parent’ approval of new registrations for their ‘child’ entities; and requiring the formal appointment of the Entity Administrator by original, signed notarized letter. Additional enhanced controls have been deployed. These controls include implementing multi-factor authentication using login.gov and notifying Entity Administrators when there is a change in the entity’s bank account information.”

Visit the GSA’s SAM.gov FAQ page for information on:

  • New login process

  • Notarized letter process changes

  • Enhanced security controls

  • Alleged fraudulent activity in SAM.gov

Questions?

If you have questions about SAM.gov, or about managing federal contracts or grants, contact Taylor Dean, CPA, CGMA, at 800.899.4623 or contact us online.

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Tags: government contractors, Taylor Dean

What Federal Grant Recipients and Government Contractors Need to Know About beta.SAM.gov

Posted by Taylor Dean on Thu, Feb 22, 2018 @ 08:08 AM

beta.SAM.gov website

If you’re a government contractor, or if your organization makes, receives or manages federal grants, you’ve probably heard about beta.SAM.gov.

According to the beta.SAM.gov website, “SAM is the official U.S. government website for people who make, receive and manage federal awards. It’s the central hub for the entire federal awards community.”

If you think SAM sounds all encompassing, you’re right – it is. Let's take a look at what the website is and whether you should create a user account.

What is the purpose of beta.SAM.gov?

With beta.SAM.gov, the GSA is streamlining and consolidating multiple federal award management systems – ten to be exact – into one website. Having one website will make it easier for people to login and manage federal awards from one central location.

Because the beta site is not fully functional yet, you should continue to use the legacy site(s) you’re already using, such as FBO.gov or CFDA.gov, to manage awards and run reports. Over the next few years, data and functionality from the legacy sites will be transitioned fully to beta.SAM.gov. For now, beta.SAM.gov will run concurrently alongside the legacy systems.

Once the migration to the beta site is complete, the authoritative site for managing federal awards will be SAM.gov.

Do you need a user account?

If you have an account in one of the legacy systems, you’ll want to create a new user account in beta.SAM.gov. You can do that here.

Once you create a new user account, you can migrate your roles from the old systems.

Additional resources

The GSA offers several helpful videos about beta.SAM.gov.

Visit beta.sam.gov's help center to learn what you can do on the website.

For help

If you have questions about beta.SAM.gov, or about managing federal awards, contact Taylor Dean or call 800.899.4623. Taylor advises government contractors and federal grant recipients.

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Tags: government contractors, Taylor Dean

7 Easy Ways To Make QuickBooks Work Better For Your Small Business

Posted by Taylor Dean on Thu, Feb 15, 2018 @ 01:06 PM

QuickBooks Tips for Small Business

Being a business owner generally doesn’t come with an excitement for keeping the books. But QuickBooks can help owners comply with the required chore of keeping accounting records in good shape without costing an arm and a leg — or needing a full-time staff with accounting degrees.

QuickBooks is one of the most widely used accounting software packages around. When setup correctly and used well, it is a formidable low-cost alternative to more sophisticated accounting systems.

Taking the time to understand the flow of information in QuickBooks, along with its limitations and flexibility, can help make running your business a lot more productive. The goal is to reduce the amount of time you spend on internal tasks, like accounting and bookkeeping, so you can devote more time to growing your business.

One of the things I like most about QuickBooks is its flexibility. With that flexibility, however, comes risk and responsibility. Metrics are only as useful as the accuracy of the data supporting them.

Rest assured, there are several easy steps you can take that will help you get the most out of QuickBooks, and more importantly, have confidence in the data that goes into and comes out of the system.

1. Setup users with their own unique passwords and rights.

First, an important distinction: users are not the same as licenses. The Admin user is just for performing administrative tasks, like modifying the chart of accounts or setting up items. The Admin user should not be used for entering transactions.

Your external accountant has a special user category, enabling you to maintain confidentiality of sensitive data, such as customer credit card numbers. If there is more than one person entering transactions or viewing activity, setting up different users allows you to limit access appropriately for each user. It also makes it clear who did what in the system.

Taking the time to setup users correctly, and with secure passwords, is just good business practice.

2. Take extra time (it’s worth it!) to think through your chart of accounts.

Create enough accounts and categorize them properly so you can analyze what you’re spending money on and how it’s impacting the business. Child accounts can be helpful in subtotaling sets of information, but if you have child accounts, posting only to the lowest account level will help with reporting.

Pro-tip — Did you create too many accounts? Merge the redundant ones. But do so with care, as you cannot un-merge them.

3. Harness technology by using bank feeds.

Bank feeds allow you to download bank and/or credit card transaction activity directly from your financial institution. However, there are a few pitfalls that go along with this convenience:
  • Bank feeds do not take the place of account reconciliations. It’s still important to reconcile the bank and credit card accounts in case items have been missed, accidentally deleted or duplicated.
  • Bank feeds can be useful for certain transaction entries. However, transactions that are linked to others, such as bill payments or deposits of customer receipts, must be entered correctly in order to be useful. Then the bank feed can be used to match a recorded transaction to what was posted to the bank. For example, bill payments get recorded through the vendor menu and customer receipts through the customer menu. When you record transactions this way, bank feeds can be used for matching transactions.
  • Some banks integrate better with QuickBooks than others. Also, some banks provide more detail than others, some require more effort to setup the integration, and some charge a fee for using bank feeds.

4. Use classes to prepare more meaningful financial statements.

You already take the time to enter business data into QuickBooks for accounting purposes. Why not get meaningful data out of QuickBooks, on the back end, to help you assess how your business is performing?Say your business operates multiple locations. If you want to compare profit and loss by office, for example, you can use classes to segregate the activity for each office. Know what parameters may already exist in a different field, such as by account number/category, so there’s no need to create classes where the parameters already exist in another field.

5. Memorize useful reports to make your favorites easily accessible.

You can run a slew of reports from QuickBooks, and there are just as many ways to customize those reports to filter the information for better reporting and decision-making.Memorizing reports keeps those unique filters and customizations so you don’t have to re-create them each time.

6. Use closing periods to finalize and safeguard your data.

I have seen a number of small businesses accidentally post a transaction to a prior year. When this happens, their books no longer tie correctly, causing someone — either an outside accountant or someone inside the business — to spend time finding and correcting the error.There is an easy fix for this. Closing periods can keep users from accidentally posting transactions to a prior period that’s already been closed, since QuickBooks requires you to enter a password to post to a prior year. This saves everyone the time and hassle of having the prior year’s data change after it has been finalized.

7. If you need job costing, use items, payroll and estimates to reduce the need for add-on software.

Job costing offers you a way to determine profitability for a specific component of a project, customer account or a set of common types of jobs. Put simply, job costing can help you see where your business is making and losing money.When you use items, payroll and estimates in QuickBooks, you can save money by reducing the need for add-on software. For example:
  • If you keep track of activity by customer on the income and expense side, using items can provide additional measurement and tracking capabilities.
  • If you use QuickBooks for payroll, the items will also come in handy. Service items allow you to categorize the work done for billing purposes. Payroll items put the expenses to the designated accounts.
  • Using estimates will open additional invoicing, reporting and measurement options.

Need Help?

Get more out of QuickBooks, starting now. Contact Taylor Dean online or by calling 800.899.4623. 

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Tags: accounting, business owners, Taylor Dean, Smart Accounting Support Solutions, QuickBooks

Learn What Grants Are Funded By Agencies In Your Area of Interest

Posted by Taylor Dean on Thu, Aug 24, 2017 @ 09:16 AM

Federal RePORTER.png

Have you ever wanted to know what grants are funded by agencies in your area of interest?

Well, now you can.

There’s a searchable database – called Federal RePORTER – of scientific awards from different agencies.

This easy-to-use database is an excellent resource for nonprofit organizations and government contractors that want to:

  • Learn more about different grants and to whom they are being awarded.
  • Get to know the research interests of federal science-funding agencies.
  • Understand different organizations' sources of support.
  • Prepare better grant applications based on additional knowledge.

Search Federal RePORTER now.

Updated annually, the database includes about 900,000 projects from 17 agencies, including the Administration for Children and Families (ACF), National Institutes of Health (NIH), and National Science Foundation (NSF).

Need Help?

If you have any questions, please call Taylor Dean, CPA, CGMA, director of Gross Mendelsohn's Government Contractors Group, at 800.899.4623 or contact her online.

overhead rate calculator for FAR audits

Tags: nonprofit, government contractors, Taylor Dean

Quick Guide: Unallowable Costs in Government Contracts

Posted by Taylor Dean on Thu, Aug 10, 2017 @ 03:02 PM

unallowable costs govcon.png

If you’re struggling to understand the difference between “allowable” and “unallowable” costs related to your government contracts, you are not alone. Even the most experienced government contractors struggle from time to time when it comes to identifying which costs can be allocated directly, indirectly or not at all to a government contract.

While FAR Sub Part 31 (FAR 31) provides numerous examples of allowable and unallowable costs, it does not cover all potential costs that may be incurred by a government contractor in the normal course of business or in performance of a contract that might be outside of their normal course of business.

FAR 31.201-2 provides a framework for determining the allowability of a particular cost using the following guidelines:

  1. Reasonableness
  2. Allocability
  3. Standards promulgated by the Cost Accounting Standards Board (CASB), if applicable, otherwise United States Generally Accepted Accounting Principles (GAAP) and practices appropriate to the circumstances
  4. Terms of the contract
  5. Limitations noted in FAR 31.201-2

Let’s take a closer look at each component of these guidelines.

What are “reasonable” costs?FAR Overhead Rate Calculator

Reasonableness is defined under FAR 31.201-3 as a cost that does not exceed that which would be incurred by a prudent person in the conduct of competitive business. There is no presumption of reasonableness just because a contractor paid the cost. Instead, reasonableness is determined through consideration of a variety of facts and circumstances, including:

  1. The cost is ordinary and necessary to the conduct of the contractor’s business or the contract performance;
  2. The expense meets generally accepted business practices, arm’s length bargaining, and federal and state laws and regulations;
  3. The contractor meets his or her responsibility to the government, other customers, the owner of the business, employees, and the public at large and;
  4. There are no significant deviations from the contractor’s established practices.

For example, if a contractor declared three Ferrari’s and an SUV as necessary to running his business, it would raise some eyebrows at the Defense Contract Audit Agency (DCAA). The costs related to the sports cars would almost certainly be deemed unallowable, including lease payments, maintenance and repair, gas and insurance. The SUV and its related costs, however, may be deemed allowable, depending on the circumstances of the car’s use.

How is allocability determined?

The determination for allocability is based on the following:

  1. Cost must be incurred specifically for the contract;
  2. Cost must benefit both the contract and other work, and the cost can be distributed to the work in reasonable proportion to the benefits received, or;
  3. Cost must be necessary to the overall operation of the business, although a direct relationship to any particular cost objective cannot be shown.

For example, the question of allocability often comes up when dealing with business development costs. Consistent business development activities (excluding those defined as expressly unallowable) are vital to an organization and can be allocated over all the contracts of the organization, both commercial and government. However, if an allowable cost only benefits some of the contracts and not the organization as a whole, only the contracts obtaining the benefit would be allocated the costs in question.

How do the terms of the contract impact the allowability or unallowability of a cost?

The terms of the contract may include costs that are specifically unallowable. All contractors must thoroughly review their prime and subcontracts to ensure that they know what costs are unallowable on a specific contract.

For example, a contract might require a contractor’s staff to perform work at a government site. However, the contract might assume that the staff are local, and therefore no travel costs would be allowable under the terms of the contract. Another example is a limitation on the number of hours individuals work on a contract to avoid overtime costs.

What happens to unallowable costs?

Costs that are expressly unallowable or mutually agreed upon to be unallowable, including mutually agreed to be unallowable directly associated costs, must be identified and excluded from any billing, claim or proposal applicable to a government contract. A directly associated cost is any cost that is generated solely as a result of incurring another cost. When an unallowable cost is incurred, its directly associated costs are also unallowable.

For example, let’s say a government contractor holds a party for its employees. As part of the costs of the party, the firm reimburses travel to the event and pays for overnight accommodations. The party itself is unallowable, which means the travel and lodging costs are also unallowable as they are directly associated with the party.

Another good example is the purchase of alcohol as part of a business meal. The business meal is deemed allowable; however, the cost of the alcohol, an expressly unallowable cost and any sales tax or tips allocated to that cost must be separately recorded as unallowable costs.

The practices for accounting for and presentation of unallowable costs must be those described in 48 CFR 9904.405, Accounting for Unallowable Costs.

How does the allowability or unallowability of costs affect certain types of contracts?

Firm fixed price contracts

If the contractor is required to provide cost and pricing information as part of the contract negotiation, the contracting officer is responsible with ensuring the pricing takes unallowable costs into account. The officer must be certain these costs are not included in the indirect rate calculations as it will impact the proposed cost of the contract.

If a contracting officer questions the contractor’s ability to account for allowable and unallowable direct and indirect costs, the contractor is likely to lose out when competing with other firms that have a known ability to track costs properly.

Time and materials contracts

If time and/or certain materials are mutually agreed to be unallowable, the contractor cannot bill for those costs. In addition, if the contractor is permitted to bill and mark up other direct costs (ODCs), the markup will reflect the indirect rate of the contractor. The costs used to calculate the indirect rate can be audited and disallowed, which can result in a contractor having to repay the government for certain claimed costs. Penalties may also apply. In addition, criminal charges can be brought under the False Claims Act.

Cost plus fixed fee contracts

All mutually agreed to be unallowable costs, expressly unallowable costs and unallowable directly associated costs cannot be billed to the contracts, either directly or indirectly. These contracts require certification of the indirect cost rates proposed for final payment purposes. If unallowable costs are included in final indirect cost settlement proposals, penalties may be assessed and the company will have to repay the government for any discovered unallowable costs. As noted above, criminal charges can be brought under the False Claims Act.

How can a contractor avoid improperly classifying an unallowable cost?

No system is 100% perfect, but contractors can take steps to mitigate the risk of improperly classifying costs:

  1. Implement an adequate accounting system that has the capacity to track allowable and unallowable costs.
  2. Develop and implement formal written policies and procedures for your company and within the accounting department to note what types of costs are allowable or unallowable and procedures for determining the allocation of such costs.
  3. Train and periodically retrain all employees on company policies and procedures. Consider more routine training for accounting personnel in policies and procedures, and how to properly report and record allowable and unallowable costs.
  4. Ensure that accounting personnel have appropriate oversight provided by experienced internal staff or external government contracting specialists.
  5. Review costs as part of month-end close processes to ensure proper classification.
  6. Test policies and procedures periodically to ensure understanding and compliance with established governmental policies and procedures. Remediate when required.
  7. Routinely review established policies and procedures to ensure that they meet current standards, guidelines and are applicable to current and projected contract types.

Need help?

To make sure your I’s are dotted and T’s are crossed when it comes to allowable and unallowable costs, contact Taylor Dean, CPA, CGMA, at 703.537.0576 or online.

Tags: government contractors, unallowable costs, state and local government, Taylor Dean

How to Use Job Costing and Class Tracking in QuickBooks to Increase Profitability

Posted by Taylor Dean on Mon, Jul 24, 2017 @ 02:29 PM

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There’s nothing quite like the sinking feeling you get when you complete a job you thought was profitable, only to discover that you barely broke even or, even worse, you lost money. These situations inevitably raise a lot of questions, specifically where you went wrong and how to avoid the same situation in the future.

One way a business using QuickBooks can keep an eye on exactly where money is coming and going is by utilizing job costing and class tracking in order to better track and manage job-to-job and overall profitability.

Job costing

Job costing allows you to determine profitability for a specific component of a job, client or set of common clients or types of jobs. This can help you keep tabs on where you are making and losing money.

Some benefits of job costing include:

1. You can determine if you made a gross profit or incurred a loss at the job, client or set of clients level.

For example, let’s pretend you work for an HVAC repair and maintenance company that services residential customers and commercial properties, and performs HVAC installations in large commercial remodeling and construction projects.

You may not want to track the profit for every individual residential project, so you might classify all residential projects as one “client,” with specific jobs set up as contracts. Under this system, you can still issue an invoice for each individual residential job, but you can also evaluate how well you are doing on residential work at an overall level.

On the other hand, you will likely want to track each of your large construction projects by themselves because the work is likely to take place over months or even years and will involve significant oversight of purchases and billings, as well as a need to track change orders.

With job costing, you have the flexibility to choose how and what you track depending upon your needs.  

 2.You can use the information for future bids and proposals to achieve a profit goal or to ensure that you do not incur unexpected losses.

 3.You can determine the profitability of certain types of work, work for certain clients, or groups of clients.

This will provide you the opportunity to either focus on more profitable jobs and clients or allow you to pinpoint jobs and clients that need to better managed or eliminated.

Direct vs. indirect costs

Direct costs

Job costing requires that all direct costs are recorded against a specific job, client or set of clients, depending upon your job costing setup. Direct costs are those costs that are only incurred as a result of a particular job, client or set of clients. Direct costs can include:

  • Direct labor hours
  • Direct materials
  • Direct supplies
  • Direct travel

In particular, in order to track direct labor, you will need to utilize a timekeeping system and ask all of your employees to allocate their time spent day-to-day to specific jobs, clients or set of clients. Also, if applicable, you will need to have employees who submit expense reports to note the specific job, client or sets of clients the expense relates to.

Indirect costs

In order to calculate the total cost of a project, you will need to apply the indirect costs. Indirect costs are expenses that do not relate to one specific contract but support the projects or business as a whole. Indirect costs need to be allocated against all contracts on a consistent and logical basis. Allocations can be tailored to your specific industry and the type of job.

Final net incomeDownload our work in progress (WIP) calculator for construction contractors!

When looking at direct costs alone, the numbers may suggest you are turning a gross profit. However, when you add in indirect costs, your original number will most likely decrease, affecting your bottom line.

Once the direct costs and indirect costs have been allocated to a job, you can run a report showing the final net income of those jobs or sets of jobs. This shows you how much gross profit you need to be making in order for a job to be profitable.

Class tracking

Class tracking allows you to track costs across broad classes or categories, such as individual rental properties, office locations, departments or producers/partners. This allows you to track all expenses associated with a particular class.

Rental properties

For rental properties, class tracking allows you to determine which properties are the most (and least) profitable. Also, by tracking all assets related to a specific property over time, you can easily calculate a net book value of the property. This data will be critical when it comes to preparing not only your yearly tax returns, but also if you ever choose to sell the property.

Office locations

Class tracking allows you to review the income and operating costs of each office location, providing you with vital information about each location’s profitability.

Department tracking

Similar to office location class tracking, you will be able to determine which departments are generating the most (and least) revenue.

Producer/partner tracking

Class tracking can help professional service firms, like law offices and accounting firms, track the productivity and costs associated with particular producers or partners. This allows decision makers to evaluate the performance of professionals and determine if compensation levels are adequate to meet the company’s financial goals.

How class tracking works

Class tracking, like job costing, requires that you allocate costs to different classes. You can allocate staff salaries and wages through the use of timekeeping systems or, if specific work allocation is not necessary, you can assign certain employees and the cost of their wages and benefits to one class.

The class tracking system setup can be tailored to meet a variety of management reporting needs. If you have an employee who works for two departments, you can split their costs based on the projected percentage of time that employee works for each department. You can allocate rent and occupancy expenses to departments by looking at the number of employees within the department or the square footage used by that department.

Need help?

Once you have set up either job costing and/or class tracking within QuickBooks, it is easy to set up customized automated reports that can be run at any time by management. To learn how you can leverage your current QuickBooks accounting system to make smarter management decisions, talk to our Smart Accounting Solutions Support team by calling 800.899.4623 or contact us online.

Tags: accounting, business owners, Taylor Dean, outsourced accounting, Smart Accounting Support Solutions, outsourced CFO

What Government Contractors Can Expect from the New Attorney General

Posted by Taylor Dean on Mon, Feb 13, 2017 @ 09:30 AM

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There’s a new attorney general in town and he’s not messing around. If you’re a federal government contractor, listen up.

During his January 2017 confirmation hearings on his nomination for U.S. attorney general, then Senator Jeff Sessions remarked, “… this government must improve its ability to protect the United States Treasury from waste, fraud, and abuse. This is a federal responsibility. We cannot afford to lose a single dollar to corruption and you can be sure that if I am confirmed, I will make it a high priority of the department to root out and prosecute fraud in federal programs and to recover any monies lost due to fraud or false claims.”

Make no mistake. Attorney General Sessions is serious about fighting fraud and abuse against the federal government. With federal government contractors receiving more than $500 billion – that’s billion with a B – annually from the federal budget, Sessions, a former prosecutor and fiscally conservative U.S. Senator, could very well have his eye on government contractors.

The False Claims Act, designed to combat fraud against the federal government, will continue to be the DOJ’s top weapon when it comes to fighting fraud. In 2016 alone, the Department of Justice recouped more than $4.7 billion from federal government contractors who defrauded the government under the Federal False Claims Act. Could that number go up? It sure could. Could federal government contractors see increased scrutiny? They sure could.

Compliance Systems to See More Scrutiny

accounting system compliance checkupWe expect to see greater emphasis on enforcing the False Claims Act with Attorney General Sessions at the helm of the DOJ. This focus most likely means that federal government contractors’ compliance systems will be scrutinized more than ever before.

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Now is the time to do a checkup of your company’s compliance program with the goal of minimizing your risk of a False Claims Act allegation.

What Should Government Contractors Do to Prepare for Increased Scrutiny?

There are steps government contractors should take now to prepare for a crackdown. Your accounting system is one element of your compliance system that should absolutely get a checkup.

Need Help?

To make sure your I’s are dotted and T’s are crossed when it comes to your accounting system’s compliance, sign up for a free accounting system compliance checkup. Or, contact Taylor Dean, CPA, GGMA, at 703.537.0576 or online.

Tags: compliance, government contractors, Taylor Dean