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Mistakes to Avoid when Shopping for a New GovCon Accounting System

Confused business manAs an entity that wants to compete for government contracts, it is highly recommended that you invest in a Defense Contract Audit Agency (DCAA)-compliant accounting system. Shopping for the right system can be a bit daunting at first, but it becomes much simpler when you laser-focus on the systems that can best meet your needs. In order to this, you must first pinpoint what your business' needs are.

Why Is DCAA-Compliant Software Needed?

This type of software is of the utmost importance during an audit because it proves to the DCAA you are utilizing a record-keeping system that keeps you in compliance with any and all DCAA requirements. More specifically, that your accounting framework has the capability to accommodate the intricacies that come along with fulfilling a cost-reimbursable contract.

Knowing What To Look for in DCAA-Compliant Software

The number one mistake you can make when shopping for DCAA-compliant software is going into it blind and not knowing what to look for, perhaps thinking that any accounting software will do the job. 

There are eight specific functions to look for when shopping for DCAA-compliant software. Before you are awarded a government contract, your accounting system will be audited by the DCAA and these specific functions will need to be present. 

  1. Compliance with cost accounting standards and the FAR
  2. Ability to differentiate between direct and indirect expenses (e.g. materials vs. utility expenses)
  3. Ability to segregate allowable and unallowable expenses ( the system will be able to exclude unallowable expenses in their entirety from the government invoice)
  4. Time-entry capabilities that are job-specific
  5. Ease-of-use in regard to storage and retrieval of all supporting documentation via attachments
  6. Comprehensive general ledger with drill down capability
  7. Budgetary methodologies used to predict costs as well as to provide support to capture actual costs by contract
  8. Ability to separate subcontracted work from employee labor with built-in labor distribution for both.

Shopping for DCAA-Compliant Software: Scalability Is Crucial 

Scalability is not a function that is mandated by the DCAA but when it comes to saving time and money, this is a crucial feature to look for. If you don't opt for scalability and instead opt for a low-end software package, you're making an expensive mistake as your perceived upfront dollar savings will cost you time, and time is money.

Business growth will bring about the need for changes in your accounting procedures, and DCAA software worth investing in will need to grow and scale with the varied reporting requirements.  In fact, one of the first things you should ask yourself when looking at a specific software program is "After the software is installed and operational, is it going to be able to scale with our company to accommodate future needs?" 

For instance, if it doesn't possess the capability to manage multiple contract types simultaneously, continue looking for one that can. And to ensure the system can accommodate the increasing number of workers your company employs, make sure it has an interfaced time collection feature.

Simplifying the Search for DCAA-Compliant Software

To further simplify the search for DCAA-compliant software, choose one that offers add-on configurations, like labor and leave and expense import add-ons.  It also needs to have the ability to generate job- and billing-specific reports. 

Lastly, the size and budget of your company will greatly influence which DCAA-compliant software will work best. Many systems are designed to meet the corporate finance and project accounting needs of companies that do less than $200 million in revenue on an annual basis while others are created specifically to meet the needs of those that exceed this revenue amount.

With regard to your budget, not identifying monetary limitations before shopping for-compliant software is a huge mistake. Keep in mind that the  DCAA wants you to have an adequate accounting system, and such accounting related costs are allowable (i.e., recoverable). 

And just like any investment worth making, the purchase price should yield a high return on investment (ROI) by keeping you DCAA-compliant and giving you a fair chance in winning government contracts, which will increase your revenue and provide the ROI you are striving to achieve.8 Steps to Take When Dealing with the DCAA

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