Deltek Costpoint Indirect Rate True-Up Invoicing

In government contracting, Deltek Costpoint stands out as a comprehensive enterprise resource planning (ERP) solution designed to meet the specific needs of government contractors. One crucial aspect of financial management is the indirect rate true-up process, a fundamental component of invoicing within the Deltek Costpoint system. In this blog, we will explore the intricacies of Deltek Costpoint indirect rate true-up invoicing, shedding light on its significance, the process involved, and its impact on government contractors.

Understanding Indirect Rates

Before delving into true-up invoicing, it's essential to grasp the concept of indirect rates. Indirect rates play a pivotal role in government contracting, representing the proportion of indirect costs (such as overhead, fringe benefits, and general and administrative expenses) in relation to direct costs. Accurate indirect rates are crucial for pricing contracts, managing costs effectively, and ensuring compliance with government regulations.

The Importance of True-Up Invoicing

True-up invoicing is a critical step in the financial management process for government contractors. It involves reconciling provisional indirect rates with actual indirect rates at the end of an accounting period (or, more typically, once the final DCAA-approved rates are received). Since provisional rates are estimates made at the beginning of the fiscal year, they may not precisely reflect the actual indirect costs incurred during the year.

The true-up process allows organizations to adjust their billed rates to align with the actual indirect rates. This ensures that invoices accurately reflect the costs incurred, promoting transparency and compliance with government regulations.

The Timing of True-Up Invoicing

The timing of true-up invoicing is not the same for everyone. Some companies run true-up invoices at the end of each fiscal year once they have closed their final accounting period at actuals. Some wait until they receive their approved DCAA rate letter (this typically will happen in the following fiscal year). Some companies do both. When you do your true-up invoicing and, how often should remain consistent for audit purposes. It is crucial to remember that if you owe the customer money, you must submit the true-up invoice. If the customer owes you money, that is typically handled on a contract-by-contract basis. This is usually determined by the availability of funds and whether they have expired.

The True-Up Process in Deltek Costpoint

Data Collection:

• Gather actual indirect costs incurred during the fiscal year.
• Compile data on direct costs and labor hours.

Calculation of Actual Rates:

• Use the collected data to calculate the actual indirect rates for overhead, fringe benefits, and general and administrative expenses.

Comparison with Provisional Rates:

• Compare the calculated actual rates with the provisional rates set at the beginning of the fiscal year.

Adjustment of Billed Rates:

• Make necessary adjustments to billed rates to reflect the actual indirect rates.
• Generate true-up invoices with the updated rates.

Invoicing and Reporting:

• Submit adjusted invoices to government agencies.
• Maintain accurate records and reports for audit and compliance purposes.

Benefits and Challenges

Benefits

Accurate Invoicing:

• True-up invoicing ensures that billed rates accurately represent the actual costs incurred by the contractor.

Compliance:

• Adhering to true-up processes is crucial for compliance with government regulations and contractual obligations.

Challenges

Data Accuracy:

• The accuracy of true-up invoicing depends on the precision of data collection and rate calculations.

Timeliness:

• Delays in the true-up process can impact cash flow and compliance.

Deltek Costpoint indirect rate true-up invoicing is a vital aspect of financial management for government contractors. Organizations can maintain compliance, enhance transparency, and make informed financial decisions by aligning billed rates with actual indirect rates. As government contracting continues to evolve, leveraging Deltek Costpoint becomes imperative for organizations seeking efficiency and precision in their financial processes.

How can Redstone GCI Help?

If you have concerns about indirect rate true-up invoicing or would like a comprehensive processing checklist, please contact one of our Deltek Costpoint consultants here at Redstone Government Consulting, Inc.