RGCI - Software Options for a DCAA Approved Accounting System

I talk with business owners all the time that are either just starting their business, or just getting their existing business into government contracting, and one of the questions we address almost weekly is – Which accounting software built for government contractors should I go with? The answer is, maybe none of them. While the popular govcon accounting software solutions are a really good option for many government contractors, you certainly aren’t limited to those. If you’re a relatively small government contractor, then other products such as QuickBooks might be a better software solution.

While it’s true that QuickBooks is not a fully comprehensive solution, if set up correctly, it will do everything that you need to maintain accounting for government contracts. If you only have FFP or T&M contracts, have a pretty standard indirect rate structure, and don’t have a very high transaction volume, then something like QuickBooks can provide a lot of bang for the buck.

Pros of Smaller Systems Like QuickBooks:

  • Cost: QuickBooks (regardless of which version) will cost hundreds of dollars per year, as opposed to thousands or tens of thousands per year for one of the big boys.
  • Implementation: Even though proper setup is needed to facilitate government contracting, that setup cost for QuickBooks, even if using a consultant, should be a fraction of the implementation cost for the bigger software packages.
  • Ease of Use: QuickBooks was developed to be run by small business owners, so it is a lot more feasible for a non-accountant to keep the books (at least handle the day-to-day transactions) using it, which is often the case for startup government contractors. This is usually not an option at all if one of the larger solutions is in place.
  • Manpower: Depending upon your transaction volume, QuickBooks can be successfully operated and maintained by one person (in many cases just a part-time position) whereas some of the other software packages can require a bit of a heavier lift to maintain.

Cons of Smaller Systems Like QuickBooks:

  • System Limitations: Even with a perfect setup and a trained accountant, there are some things that QuickBooks just won’t do. The prime examples are calculation of indirect rates and contract monitoring (i.e., ceilings, funding, mods, etc.) – both of which are requirements if you’re doing business with the government. However, these can be accomplished via excel, or in some cases with software plugins. Timekeeping and labor distribution can be other challenges, and both are required for govcon compliance. Labor distribution will work fine if using the native payroll functionality within QuickBooks and can be addressed even if using a 3rd party payroll provider. There are options for Timekeeping as well. (Stay tuned: We’ll dive deeper into this in a follow-up blog in the next month or two).
  • Data Integrity: The flipside of the ease-of-use benefit with QuickBooks is that it takes intentional accounting process and controls to maintain integrity and avoid accidental errors. While process and controls are still needed with the larger software options, they are much more structured and it’s not as easy to accidentally change things in prior periods that have already been closed.

Can I have a DCAA-Approved Accounting System with QuickBooks?

While many companies involved with government contracting start out with FFP and / or T&M contracts, usually they grow to the point (sometimes very quickly) that they are bidding on cost-type contracts, and in order to win those, you need a DCAA-Approved accounting system. And yes, you can have a DCAA-Approved Accounting System using QuickBooks. I’ve been party to assisting numerous QuickBooks clients with their SF1408 Pre-Award Survey, all to successful result. While there is some work and proper setup required to ensure all the boxes are checked, QuickBooks (as well as some other smaller software packages such as Xero) can absolutely meet all the DCAA requirements.

More information on DCAA pre-award accounting system requirements can be found here.

I said earlier that QuickBooks can be a good option if you only have FFP or T&M. That is true – maintaining the books for these types of contracts is pretty straightforward and QuickBooks will work even for mid-size businesses with these contract types. That said, QuickBooks can still potentially get the job done if you have cost-type contracts. Clearly, you need to be able to capture costs by contract or CLIN in order to determine invoice amounts, but QuickBooks can do that no problem, and frankly, you should be doing this for FFP and T&M contracts as well. You probably will need the help of excel when it comes to calculating invoices and tracking cumulatives, but you can easily pull data from QuickBooks to support these calculations, and with its invoice formatting tools, you can even customize your QuickBooks invoice to meet the needs for standard cost-type invoice submission.

So, if you’re just getting into government contracting, I recommend that you consider QuickBooks or a similar system so that you can hit the ground running and still keep things pretty lean cost-wise. If you’re already there but thinking you need to upgrade to a significantly more costly accounting system, I encourage you to take a look at what isn’t working for you and consider whether your QuickBooks system can be optimized for better results, or if you really need to make the investment in a more robust solution.

Redstone GCI has a Collaborative Accounting team with extensive experience available to assist contractors with all manner of GL accounting support. We provide ongoing real-time accounting services, periodic review, establishment of close processes, client training, and more. Our services in this area also include support setting up your accounting system (including QuickBooks) from scratch and / or optimizing your existing accounting system for govcon compliance, as well as assistance with pre-award accounting system review prep. Our team would be happy to discuss any potential issues or concerns facing your organization as it relates to these areas.

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Written by Amanda L. White, CPA

Amanda L. White, CPA Amanda White is a Senior Managing Consultant within Redstone GCI’s Collaborative Accounting Solutions Group based in Huntsville, AL. She is a Certified Public Accountant with almost two decades of progressive experience in the accounting and government contracting industry. Her experience includes a combination of internal and external accounting support where she has assisted both government contractors, as well as a diverse range of other industries. Her unique collection of experience and knowledge on a wide range of accounting software, coupled with her practical experience and focus on process improvement and efficiency provides a strong skillset for support of our government contractor clients. Her role includes leadership of ongoing collaborative accounting engagements where she provides controllership support of Redstone GCI clients. She additionally serves as a subject matter expert on accounting process improvement, implementation of internal controls and other areas as part of the firm’s support of the DFARS Business Systems. Professional Experience Amanda first started working in industry accounting for a large commercial service provider while in college. She gained early experience as a regional billing manager and managed payroll for hundreds of employees, while also handling a dual role as an operations manager. After completing her bachelor’s degree, she went to work in public accounting where she gained additional exposure in GL accounting, as well as tax, audit, and consulting. Following her initial time in public accounting, Amanda served as the Business Operations Manager for an engineering services company supporting the defense and aerospace industry. She wore many hats in that position and not only maintained and closed the books, but also handled all CFO‐level financial reporting and budgeting, indirect rate calculations, provided bid and proposal support, implemented internal controls, developed processes and procedures to help ensure DCAA‐compliance, etc. Although she left that role to start her own practice in 2011, she has continued to work with that company as a contractor and has now supported them for more than 10 years. Amanda spent the next 6 years building her own local practice supporting local small businesses. Her team provided startup support, ongoing accounting, income tax planning and preparation, and consulting to both commercial entities and small government contractors. In addition to completing her MBA during this time, she successfully grew that business, and her practice was acquired by a local CPA firm in 2017. She then took over the task of heading that firm’s Accounting Services Dept, and most recently served as a Senior Manager. In that role, Amanda managed a team of accountants providing all levels of GL accounting support to clients across the country in numerous industries. In addition to providing review and oversight to her team of 12 accounting staff members, Amanda was responsible for developing and delivering training content not only to the team but also for clients, implementing processes and procedures both internally and externally, and functioning as a subject matter expert. In this capacity, she executed process improvement projects to help clients maximize accounting efficiency, leverage their accounting systems to provide accurate and effective financial data to facilitate management decision‐making, and increased profitability. Amanda’s operations exposure, and extensive background in GL accounting in numerous industries, combined with her experience starting and growing her own business enables her to provide robust guidance and support to our clients. Education Amanda earned an Associate of Science in Entrepreneurial Management from Calhoun Community College. In addition, she earned a Bachelor of Science in Accounting degree and a Master of Business Administration degree from The University of Alabama in Huntsville. Affiliations Certified Public Accountant – State of Alabama QuickBooks Pro Advisor Alabama Society of CPA’s (ASCPA) American Institute of Certified Public Accountants (AICPA)

About Redstone GCI

Redstone Government Consultants are a team of the most senior industry veterans and the brightest new talent in the industry. Many have held senior government positions including leadership roles in the DCAA. Our new talents bring significant accounting and software experience along with fresh perspectives, inspiration and energy to our team. Through our leadership and combined experience, we provide a unique perspective, bringing both government and contractor proficiencies to bear and ensuring rock-solid government compliance for our clients.

Topics: Compliant Accounting Infrastructure, Small Business Compliance, Quickbooks