SBIR Accounting Myth #18: “I have an FFP Contract, I don’t need an adequate accounting system.”

Remember, best practices. Also remember, future work may not be fixed prices. Therefore, if you’re in business awhile and go for a CPFF contract, the government would expect a functioning accounting system as a recurring contractor. Also, being able to demonstrate how you computed your rates for your FFP contract is normally required. In other words, an FFP contract is not freedom from adequacy.


 

This is myth #18 of our SBIR Accounting Myths blog series. George Moker is a CPA and an entrepreneur who brings a real approach to managing the accounting needs of your firm. George created this series of blog posts to his more than 30 years of small business and startup experience in an attempt challenge the myths about an adequate accounting system and its importance within your organization.

For more information on how we can help with your SBIR accounting needs, please visit us at www.mokercpa.com

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SBIR Accounting Myth #17: It’s Okay to Wait Until the Last Minute to “Plug” My Indirect Rates into my Proposal

Not a good idea. First of all, plugging the difference between the solicitation limit and your direct costs is gives no indication of what your costs will really be. Second, waiting until last minute doesn’t give you enough time to adequately prepare an indirect budget to compute your rates. If your accounting system is inadequate, the point is moot anyway. Adequate accounting system anyone?


 

This is myth #17 of our SBIR Accounting Myths blog series. George Moker is a CPA and an entrepreneur who brings a real approach to managing the accounting needs of your firm. George created this series of blog posts to his more than 30 years of small business and startup experience in an attempt challenge the myths about an adequate accounting system and its importance within your organization.

For more information on how we can help with your SBIR accounting needs, please visit us at www.mokercpa.com

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SBIR Accounting Myth #16:”The Safe Harbor Indirect Rates Are the Best for My Business”

Not necessarily. As I say to my clients, don’t you want to know the truth? While some solicitations will limit your indirect rates to the safe harbor, other agencies and phases provide more flexibility. Time and time again, awarded underestimate their indirect rates costing profit and precious cash flow. With an adequate accounting system, this exercise is easy. Obviously, the contrary is true. In my more 15 years in this space, indirect rates are rarely on the higher end. For unfunded companies, this is dangerous to the firm’s survival. Your accounting system should position you to recover all of your allowable costs.  Simplicity is not in your best interests in this case.


 

This is myth #16 of our SBIR Accounting Myths blog series. George Moker is a CPA and an entrepreneur who brings a real approach to managing the accounting needs of your firm. George created this series of blog posts to his more than 30 years of small business and startup experience in an attempt challenge the myths about an adequate accounting system and its importance within your organization.

For more information on how we can help with your SBIR accounting needs, please visit us at www.mokercpa.com

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SBIR Accounting Myth #15: “I Don’t Need a Payroll Service”

Yes you do. This is one I never understand. For a very affordable price, it makes sense to have your employees’ withholding taxes timely deposited, unemployment taxes paid, paychecks properly classified, and W2’s and tax returns timely filed. The cost for an error is substantial from the IRS as you are holding taxes in trust for others which makes everyone very sensitive. Also, you save time, have a clearer audit trail to employees’ labor costs used for labor distribution since this is connected to timekeeping. This is the classic penny-wise, pound-foolish cliché.


 

This is myth #15 of our SBIR Accounting Myths blog series. George Moker is a CPA and an entrepreneur who brings a real approach to managing the accounting needs of your firm. George created this series of blog posts to his more than 30 years of small business and startup experience in an attempt challenge the myths about an adequate accounting system and its importance within your organization.

For more information on how we can help with your SBIR accounting needs, please visit us at www.mokercpa.com

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SBIR Accounting Myth #14: “I Can Change My Employees’ Timesheets”

Never! Only your employee can change their timesheet, with a signature and explanation (adequate automated systems require this). Employee timesheets should not look like a creative canvas of numbers and doodling, but rather, should be well organized and structured so the proper cost objectives are indicated and time can be accurately posted to the correct direct (by project) indirect and unallowable cost accounts.  Your employees should be adequately trained as part of onboarding orientation and at least a semi-annual primer (documented in a meeting agenda). Adequate timekeeping is not only a requirement, but a best practice. After all, labor drives most of your costs, profit and value.


 

This is myth #14 of our SBIR Accounting Myths blog series. George Moker is a CPA and an entrepreneur who brings a real approach to managing the accounting needs of your firm. George created this series of blog posts to his more than 30 years of small business and startup experience in an attempt challenge the myths about an adequate accounting system and its importance within your organization.

For more information on how we can help with your SBIR accounting needs, please visit us at www.mokercpa.com

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SBIR Accounting Myth #13: Research & Experimentation Tax Credits are for the Big Firms

Not true. This is a nice benefit for small firms that engage in qualified research activities and have unfunded research. For corporations, unused tax credits may be carried back 2 years and forward 20. For S-corporations and LLC’s, the credits pass through to the owners, creating a dollar-for-dollar tax reduction (that’s the great thing about credits) – however – watch out for the dreaded alternative minimum tax.


 

This is myth #13 of our SBIR Accounting Myths blog series. George Moker is a CPA and an entrepreneur who brings a real approach to managing the accounting needs of your firm. George created this series of blog posts to his more than 30 years of small business and startup experience in an attempt challenge the myths about an adequate accounting system and its importance within your organization.

For more information on how we can help with your SBIR accounting needs, please visit us at www.mokercpa.com

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SBIR Accounting Myth #12: “Being a Cash-Basis Taxpayer Makes the Most Sense”

Sometimes. If your business has a cost-plus-type contract (CPFF), this may not be a big problem as long as your expenses are paid and your federal voucher payments are received in the same accounting period. Fixed price contracts (FFP) tend to be more problematic as payments received from the government seem to always be in advance of your direct cost burn rate (plus indirect rates), therefore, resulting in taxable income. The good news is good planning can maximize this benefit and simplicity. However, not many people plan and the chips fall randomly.


 

This is myth #12 of our SBIR Accounting Myths blog series. George Moker is a CPA and an entrepreneur who brings a real approach to managing the accounting needs of your firm. George created this series of blog posts to his more than 30 years of small business and startup experience in an attempt challenge the myths about an adequate accounting system and its importance within your organization.

For more information on how we can help with your SBIR accounting needs, please visit us at www.mokercpa.com

Posted in General Accounting, SBIR | Tagged , | Leave a comment