What do we mean by “flexible” accounting software?

As software publishers, we tend to promote our products as “flexible” when it comes to accounting and timekeeping features. But, what exactly does that buzzword mean? In this context, flexible means the opposite of “rigid” – a moniker that is often applied to stovepipe software that was originally developed back in the 1980′s and perhaps still in use today. Make sense? If not, the following  is a recent example of software flexibility when it came to the performance of an accounting task that was easily handled in its entirety within SYMPAQ, and not “outside” of the system (i.e., manually).

We received a call last week from a client  who had a requirement to reissue 1099′s from 2011. The problem was that although the dollar amounts on the 1099′s as reported were correct, some of the EIN’s (and SSN’s) had been entered incorrectly and not corrected prior to issuance. When this occurs, the IRS requires that the issuer zero out the 1099′s that were issued with the incorrect EIN’s, and reissue them with the corrected EIN’s. So, we easily reopened calendar year 2011, and entered an adjustment 1099 to zero out the dollars on the 1099′s that were originally issued with errors and printed those, and then we reprinted the 1099′s that had both the correct dollar amounts and the corrected EIN’s. No additional postings to a previously closed year were required, and the amounts reflected in the General Ledger remained unchanged. The problem was resolved, and the client was pleased that SYMPAQ featured  the native “flexibility” to make the necessary corrections without resorting to external inputs.

To be sure, there is a line to be drawn between an accounting software package that is highly flexible, but has few internal controls and is not inherently DCAA compliant, and a software package that is both flexible and has the required internal controls required by government contractors. SYMPAQ features tight internal controls and a highly visible audit trail, combined with the flexibility you would expect from modern accounting software.

BI for government contractors

BI is short for “business intelligence”, but what do those words mean as they relate to your government contracting business? You hear and read much these days about the need for analytics, data mining, and dashboards in order to gain and maintain your competitive edge. Hard-to-use and expensive options abound, but two of the most straightforward and powerful options feature a low cost of ownership, and are easy to acquire.

Pre-Award BI

If you use FedBizOpps to identify opportunities that fit your expertise and a separate CRM system to manage those opportunities, there is an inexpensive, user-friendly and highly flexible subscription based solution for government contractors called EZGovOpps that combines contracting opportunities with a built-in CRM component to enable you and your team to identify and collaborate on capture efforts.

Post-Award BI

If you use Excel 2010, and are adept at using pivot tables, there is a free add-on from Microsoft called Power Pivot that can be downloaded and added to your Excel workbook.  Power Pivot enables you to connect to any SQL database or other relational database to enable “Self-Service BI” within the familiar setting of your Excel spreadsheet.  You can easily connect to SYMPAQ SQL’s database via its native ODBC driver to access tens of  thousands of rows of data within your spreadsheet, and use Power Pivot to gain insights into your cost accounting data.

The DCAA Blues

In a recent survey of federal contractors conducted by the public accounting firm Grant Thornton, close to one in five contractors report bad blood between them and the DCAA. Per the survey, “The relationship between contractors and government auditors and contracting officers has deteriorated during the past year. The relationship with auditors was rated as fair or poor by 19% of the surveyed companies.”

This is nothing new. Contractors and auditors have had a contentious relationship over the years, and it was only exacerbated by the 2008 GAO report that was critical of the DCAA . Auditors will tell you that part of their mission is the dis-allowance of billed costs and the recovery of such costs on behalf of the federal  government. While it is never a good idea to be uncooperative with DCAA auditors, it is a good idea to spend as much face time as possible with them while they’re on your premises and to not leave them alone with your accounting records as they further their mission. As they question costs, it is always good to be there to provide answers, because otherwise you might not get the benefit of the doubt. Not that you have anything to hide, but remember they are looking to find ”unallowable” costs that they can recoup on behalf of the US Government. It has been found that companies who leave the auditors to their own devices will be given a negative audit report more often that not. Having an “acceptable” and  compliant cost accounting system (such as SYMPAQ) that features a clear audit trail will definitely help make the auditor’s job easier, but they are looking for deficiencies in your costing and billing practices and nothing is going to change with respect to their primary focus.

For more on the survey:

FINAL17thSurvey

A-133 Audit Concepts

A-133 Audits roughly follow the same accounting and cost recovery guidelines as do federal contract awards that are governed by the FAR.  OMB Circular A-122 “Cost Principles for Non-Profit Organizations” covers project cost accounting topics familiar to most government contractors such as the recovery of direct costs, indirect costs, allocation of costs and the allowability of costs. While a grant does not include a profit component, a common misconception is that only NFP’s are subject to an A-133 audit, when in fact any entity – including for profit government contractors – with  $500,000 or greater in awarded grants during a fiscal year are eligible for such an audit. Also known as a “Single Audit”, these audits are typically performed by independent public accounting firms and occasionally by DCAA, and the focus is not only on the application of costs to federal grants, but also on an organizations’ compliance with laws and regulations and the recipient’s internal controls. Whether your organization receives grants or contracts, SYMPAQ is structured to apply direct costs and allocate indirect costs by project, and to provide a clear audit trail on how those costs are expended against the budget ceiling.

How long will it take to implement your software?

Earlier this month,  I was presenting our SYMPAQ  product line to a CPA firm that specializes in government contractor audits and with DCAA compliance. While discussing pricing options, one of their professional staff asked a question that is almost rhetorical in nature, but nevertheless  has been asked a thousand times before. That is, “How long does it take,  and what will it cost to get your software up and running?” While on the surface this seems to be a fair question, it also a complex one that simply does not have a set answer. So I replied, “I’d need to know more about particular requirements, because the cost varies from one client to the next.”  “Okay then, can’t you just give me a ballpark figure?”

The truth is there is no ballpark figure as such, or at least no more of one than you’d likely get if you were to ask a general contractor to give you an estimate for remodeling your kitchen without first seeing your kitchen, or for putting an addition on your home without seeing your home. At its core, an accounting software package is a database built around a set of business rules and algorithms. And,  given the available feature set, how much of the system do you intend to utilize? Is it 100% of the available feature set? Perhaps 75%? An independent research study revealed that 45% of a software systems’ features and functions are never used!*  This is because there are many variables. For instance, you might process Payroll in-house or you might outsource it to a third-party service bureau. If it is the latter, then obviously the integrated payroll feature set will not be utilized and there are no related costs associated with its implementation.

You should also consider your role in the process  and keep the following organizational factors in mind that happen to be beyond the control of your software vendor:

•  The amount of your internal accounting staff involvement during the implementation,

•   Staff skill level,

•   Daily workloads during the time of implementation, affecting the amount of time given to concentrate on the implementation.

Always remember to include your internal staff and their time while preparing your budget, because your vendor works in tandem with your staff and delegates responsibilities to them when practical. You don’t want a high-priced consultant doing routine data entry, do you? At the same time, if you would like to have your existing data converted and imported, then be sure to include a budget line item for data transformation.

A software vendor could calculate the average costs of professional services billed to its past several customers and use that as a basis for an estimate, but that would not necessarily yield a meaningful budget figure. The bottom line is that without first conducting a survey to gauge expectations and assigning resources on the front-end of the conversion process, it is just not possible for a software vendor to accurately estimate the time and dollars involved with the goal of getting “up and running”.

* Where do unused features come from?

DCAA Approved Accounting Software Redux

We received an e-mail recently on a topic that won’t seem to go away. In all the years we’ve been doing this, the legend of DCAA approved accounting software remains on par with the Loch Ness Monster and Bigfoot. The e-mail stated, “From time to time articles in trade publications suggest there is a list published by the DCAA or another government office of ‘approved’ software for government contractors.  Is this true, and if so, can you point us to the list?” So, we put the question to the DCAA and received this response from one of their employees at DCAA headquarters in Virgina, “I do not know if any such document exists or if one could be located. Actually, I think that might be illegal for us to do. That is an ethics issue.” So there you go, Nessie. Did you get that, Sasquatch? If an official list of DCAA “approved” accounting software actually does exist, it is as mythical as you are.

Firm Fixed Price Contract Audit Exposure

Fixed price awards don’t require cost accounting, you say? Every so often, we’ll hear  government contractors provide us with words of wisdom to the effect, “We don’t need cost accounting software; all of our government business is firm fixed price. So we’re not subject to audits.”

While it may generally be true that fixed-price contracts do not require DCAA incurred cost audits, you still must justify your cost structure in a pre-award audit with certain FFP contract types.  When your contract is a fixed price incentive contract, for instance,  FAR 16.4 stipulates, “This contract type may be used only when—(1) The contractor’s accounting system is adequate for providing data to support negotiation of final cost and incentive price revision; and (2) Adequate cost or pricing information for establishing reasonable firm targets is available at the time of initial contract negotiation.”

While some FFP contract types (e.g., sealed bid) that are beneath a predetermined dollar threshold may not require supporting cost data, several fixed price contract types do require an adequate accounting system. Besides, don’t you think it would be a good idea to have an accurate picture of your cost structure when bidding on any type of contract, be it fixed price or otherwise?