If you run a contract-based business, breaking into the field of government contracting can be a lucrative source of new income that can really help your business grow and thrive. However, government contracting also comes with a great deal of compliance requirements that every contractor must abide by. If you’re new to government contracting, it’s important that you ensure you’re in compliance with all relevant standards, including DCAA and FAR, so that you can remain in good standing with government entities and continue receiving contracts. Keep reading to get some important compliance tips for those who are new to government contracts.

Get Your Data Security Up to Snuff

The federal government, very understandably, has some pretty strict standards when it comes to data security and nondisclosure agreements. While the exact level of security required may vary slightly depending on the exact type of work you’re doing, you should be prepared to have your data security measures checked. The government will want to ensure that any data they provide to your business will be in safe hands and protected from would-be hackers.

If you don’t yet have an intricate and carefully managed data security system, you should establish one as soon as possible. This includes security features like regular data backups, tiered access to documents, data encryption in transit and at rest, among other things. Additionally, all of your employees who are working on government contracts will need to be willing to sign nondisclosure agreements when the contract requires it. Showing that your business is capable of carefully guarding government data will help put you in the running for future contracts.

Configure QuickBooks Appropriately

QuickBooks is a commonly used bookkeeping software for businesses, but if you want to contract for the federal government, you’ll need to configure that software to ensure that it’s in compliance with DCAA requirements. This takes a bit of work, since QuickBooks itself is not actually designed to adhere to DCAA and FAR standards on its own. You’ll need to look into various add-ons and new ways of setting up timesheets, payroll, contracts, funding, employees, and other parts of your bookkeeping to make compliance possible.

You’ll need to configure your chart of accounts so that it shows proper separation of direct and indirect costs, an accumulation of costs under the general ledge control, the exclusion of unallowed costs based on FAR 31, as well as some other requirements—and this is just the first step. Ultimately, configuring QuickBooks to be DCAA and FAR compliant is a great deal of work; however, it will give you the firm foundation you need to make your accounting practices compliant with government standards.

Make Sure Your Timekeeping Processes Are Compliant

You will also need to examine the way that you track and report employee hours to determine if your current practices are DCAA and FAR compliant. Again, there is a rather long checklist to follow in this area of your business practices, but here are a few of the highlights:

  • Employees must complete their own timesheets and then have those sheets approved by a supervisor; supervisors cannot fill out the timesheets on employees’ behalves.
  • Your timekeeping system should clearly identify which contracts employee labor hours are logged to.
  • Labor hours must be divided into both direct and indirect costs as is appropriate for the contract.

This is just the tip of the iceberg, so be prepared to adjust some of your current timekeeping procedures in order to bring your business into compliance with the necessary standards for government contractors.

Schedule Periodic Management Reviews

Last but not least, it’s important that your business has established policies and procedures, and that a periodic management review can verify those policies and procedures are being followed. Essentially, the federal government wants its contractors to be constantly double checking that their business’s practices are in alignment with compliance standards, and that nobody has slipped back into old, non-compliant habits. This also helps your business when you’re facing a DCAA audit—something that all government contractors will inevitably have to go through.

If you’re concerned that your business’s accounting system isn’t compliant with DCAA, FAR, and CAS standards for government contracting, we can help. Peter Witts CPA specializes in working with government contractors and helping businesses like yours remain in compliance with accounting standards and in good standing with the federal government. From configuring QuickBooks to maintaining detailed labor records, our CPAs can help you remain in compliance so you can continue receiving lucrative government contracts. Call now to schedule a consultation and see how we can help your business grow.