How can you tell if you have outgrown your current accounting system? Members of Cherry Bekaert’s Government Contractor Consulting group, including John Carpenter, Curt Smith, Eric Poppe, and Javier Diaz participate in a roundtable discussion on some of the key indicators that a contractor has outgrown its accounting system, including:
- Increasing or change in contract types (e.g., Firm-Fixed-Price, Time & Materials (“T&M”) and/or Cost Type)
- Increased organizational complexity and complex rate structures
- Continuously adding General Ledger accounts to keep up with tracking requirements
- If you have multiple Excel worksheets used to reconcile and get information from your accounting system for Defense Contract Audit Agency (“DCAA”) request or other agency reporting requirements
Related Podcasts
- Adequate Accounting Systems Requirements for Government Contractors
- DFARS Cybersecurity Requirements: NIST 800-171 Compliance for Government Contractors
- VOSB and SDVOB Changes that Government Contractors Need to Know
HOST: DANIELLE DESONIA: Welcome to Cherry Bekaert's GovCon Podcast, where we discuss current government contracting trends, compliance matters, and best practices to guide federal contractors forward.
HOST: DANIELLE DESONIA: I'm Danielle DeSonia, a manager with Cherry Bekaert Government Contractor Services Group. Here with me I have a roundtable of government contract consultants to discuss how a contractor knows they've outgrown their current accounting system.
JOHN: There are many indicators. To start, we often hear from clients that as they accumulate different contract types, they are more likely to need a more robust system.
JOHN: It may be manageable to handle half a dozen firm-fixed-price contracts, but when you have FFPs, T&M contracts, and cost-type contracts, often multiple of each, it becomes increasingly difficult to remain on a basic system such as QuickBooks or Peachtree.
HOST: DANIELLE DESONIA: Absolutely. Kurt Smith, what do you have?
KURT SMITH: The complexity of your organization influences this. If you have a straightforward structure, just a single unit, your accounting system typically does not need to be complex unless your contract mix is diverse.
KURT SMITH: If you have two divisions, a central office, and hundreds of employees, your rate structure will grow and become more complex. You'll likely need multiple direct labor categories for your T&M contracts, and that complexity can necessitate an accounting system change.
ERIC POPPE: If you are the accountant and find yourself continually adding general ledger (GL) accounts to the chart of accounts to meet tracking requirements, that's a red flag.
ERIC POPPE: If you lack an integrated project costing ledger and create multiple unallowable travel accounts for each overhead pool or separate labor accounts for each pool, your chart of accounts can balloon to thousands of accounts that must be reconciled and consolidated.
ERIC POPPE: At that point, you need to replace the accounting system and adopt a more robust solution.
JAVIER DIAZ: I would say your reporting requirements are another indicator.
JAVIER DIAZ: If you must submit an incurred cost submission (ICS) every year and you find yourself using multiple Excel worksheets to reconcile and extract information from your accounting system to complete the required schedules, it's probably time to get a new accounting system.
HOST: DANIELLE DESONIA: I think everyone is hesitant to switch accounting systems because it is a lot of work, but in the end it is usually worth it.
HOST: DANIELLE DESONIA: Thanks, everyone.
