QuickBooks Online is one of the most used accounting software for small to medium-sized businesses. The same is true for small businesses in the government contracting sector. QuickBooks Online does not label itself as a DCAA-compliant software to the extent that other software does (Costpoint, Unanet, etc.). However, it is a DCAA-compliant software, and it has the reporting capabilities needed to be considered as such. Let’s look at three essential reports you need to use as a government contractor for QuickBooks Online. Now, I realize these reports are not exactly groundbreaking reports. However, some people fail to realize the importance of each report and do not really understand how to utilize them to their full potential.
Note: Other accounting software will have these same reports but will sometimes be referred to by a different name.
Profit and Loss (P&L)
You cannot discuss the topic of accounting for government contractors without bringing up the Profit & Loss report. After all, your income and costs are the main focus for DCAA when performing an audit. For example, a pre-award audit (SF1408) is solely focused on the adequacy of your accounting system and how well it can account for costs in accordance with their specified guidelines. The Profit & Loss report will give you the visibility that you need in order to see all of your income and costs. I love to use a P&L to review all sorts of trends like gross margin, revenue trends, trends in costs, and so much more. Trends can sometimes highlight areas where mistakes have taken place. For example, maybe your gross margin has been running 54% from January through March. Suddenly, it is running 14% in April, but nothing has changed in your business. This would indicate a potential error somewhere in revenue or direct costs. Aside from trends, I also love to use the P&L as it allows me to drill down into the accounts to ensure that prepaids, fixed assets, accruals, and unallowable costs were not missed. There are several other ways to use the P&L, but those are 2 of the important ways that I like to use it.
Profit & Loss by Customer
The P&L by Customer is just as important as the standard P&L. Think about the example above where we discussed the 54% gross margin. What if $50k in direct labor was coded to the wrong job? Well, it would appear to be fine on the standard P&L. Only the P&L by Customer would reveal this mistake. The P&L by Customer must be analyzed to ensure all costs are coded to the appropriate job. This also includes making sure that all direct costs are tagged to a job and that all indirect costs are not tagged to a job.
Balance Sheet
The balance sheet is one of the least exciting financial statements. Many owners and executives are not as interested in this report. However, it has great importance in your list of financials. How can the Profit & Loss reports be accurate if the Balance Sheet is not? For example, if prepaid expenses, accrued expenses, and accrued wages are not correct on the Balance Sheet, then it would be impossible for the Profit & Loss Reports to be accurate. This is why every account on the Balance Sheet must be reconciled on a recurring basis.
I have barely scratched the service by discussing the three reports mentioned above and have only covered a fraction of all the different ways they can be utilized. There are also many other reports that government contractors can benefit from in QuickBooks Online. Do you have questions about reporting in QuickBooks Online? Our team at Redstone GCI can help.
Dylan McMurrey is a Senior Managing Consultant in Redstone Government Consulting’s Collaborative Accounting Solutions Group, where he provides strategic accounting support, government contractor-specific reporting, and financial system optimization. With experience spanning public accounting, financial management, and compliance, Dylan offers a comprehensive approach to accounting solutions that helps government contractors navigate complex financial environments. His expertise in account reconciliations, project analysis, revenue recognition, and software implementations allows him to support clients in streamlining processes and improving operational efficiency. Dylan began his career in the banking industry, supporting financial operations and developing a strong foundation in accounting systems and reconciliations. He later transitioned into public accounting, where he gained extensive experience in financial reporting, tax preparation, attestation services, and compliance for various industries, including government contracting. His background in managing financial closes, payroll and sales tax compliance, and financial analysis gives him a well-rounded perspective on the unique challenges government contractors face. Before joining Redstone GCI, Dylan held roles in accounting and financial consulting, where he was responsible for monthly and annual financial closes, accounts payable and receivable, tax filings, and developing financial models to support budgeting and forecasting. His expertise extends to accounting software solutions, where he has supported clients using multiple accounting software packages. At Redstone GCI, Dylan plays a key role in collaborative accounting support, assisting government contractors with monthly accounting and reporting activities, financial system implementations, and process improvement initiatives. He also supports Redstone GCI’s compliance and software implementation teams, leveraging his experience to assist clients in DCAA-compliant system set-up, including supporting policies. Dylan’s strong technical background, problem-solving skills, and commitment to client success make him a trusted resource for government contractors seeking to enhance financial operations and maintain compliance with confidence.