By Paul Skurpski, PVBS Vice President of Sales & Marketing
We come across many government contractors that are still doing many of their cost accounting functions manually. In some cases, it seems that they don’t know there’s a higher risk associated with manual processes. In others, they feel that they’re stuck on manual and cannot automate certain functions. Automating historically manual accounting processes helps create a system that reduces back office costs and compliance risk. In this blog, I’ll discuss some of the hidden costs of doing things manually and offer some suggestions on how to get “unstuck on manual.”
Before I go any further, it’s important to note that based in our experience working with clients dealing with DCAA and financial auditors, we have seen the auditors seem more comfortable auditing information generated from automated versus manual systems. When it’s automated, they can reduce the steps they need to do to get access to the information they need and follow up the audit trail embedded in automated accounting systems that might not be available or easy to follow in manual systems. With their increased workloads, auditors have more contractors to audit in less time. Time savings are extremely valuable.
Government contractors have different challenges than other services companies that support commercial enterprises primarily. Off the shelf software products typically account for firm fixed price or time and materials projects because that’s standard in commercial business.
However, in the government contracting world, it’s cost-reimbursable contracts that are the norm, and that’s where allocations need to be accounted for. Contractors bill based on provisional rates and try to manage the actual variance to make sure they’re not over billing or under billing the government. They often need to manage very complex contracts and need a system specifically built to serve them. It’s a bear to do manually and mistakes are bound to happen.
We see many government contractors that are stuck doing manual processes that should be automated. Time sheets, for example, are being done at many places on paper. Why not enter time and expenses through a web portal? Everything flows into the accounting system and in just a few clicks you can run a labor distribution report and better understand contract utilization and realization.
Another area where contractors are doing too many things manually is in billing. If you’re handling all of your billings on paper, you’ll need to tabulate the time sheets, total them, verify that the employee entered the information correctly, and type it into Excel or the accounting system one line at a time. There are too many places where bad data can enter the system, which leads to a string of potential errors when you report to the government.
In my next blog, I’ll discuss the reasons why government contractors get stuck in this manual loop and will offer some ways they can break out of it.