Accounting Challenges Facing Government Contractors and How to Solve Them
Government contractors have unique accounting requirements. They have a variety of complexities, putting them in a different category in comparison to other niches in the industry. They are not only subject to standard accounting practices, but their field is riddled with accounting regulations, requirements, and other challenges.
The complicated and frequently changing rules and requirements in government agencies creates several accounting and financial challenges for contractors. They are faced with new and complex responsibilities such as continual audit readiness, the need for diligence, and the requirement to be on the cutting edge of practical solutions in order to establish solid accounting processes.
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Here are a few common challenges yet overlooked regarding financial government and accounting systems for government contractors. This will allow them to be aware, improve, and increase their competitive edge as a government contractor and their likelihood of success in their assessments.
1. Not comprehending the constant change in Government requirements
Accounting standards for government contractors are far more stringent than those set out for regular businesses. The requirements and regulations are not only more complicated, but they are also more volatile because many of the rules can change quickly.
With the government’s already voluminous requirements constantly changing, government contractors must keep an eye on standards and regulations such as Cost Accounting Standards, Federal Acquisition Regulations, and FAR agency supplements. Whether they are new to the industry or seasoned professionals, it is essential to keep an eye on the standards and regulations. They must know what requirements have changed and be fully aware of what auditors look for throughout their evaluation.
Maintaining Documentation Regarding Regulation Changes
As previously stated, accounting regulations for government contractors are continuously changing, finding it is challenging to stay up to date on new legislation. Even more difficult is ensuring that corporate documentation, policies, procedures, and systems are abreast of the changing requirements. Many new government contractors are at a loss in this area and cannot keep up with the rapid flow of changes.
Staying on pace with federal regulations requires vigilance. Managing a perpetual stream of changes in requirements is one of the ways operations are done in government contracting. Contractors should always prepare for changes, especially keeping an eye on federal regulations for transparency, finances, and the economy, and also be flexible to make way for modifications and adjustments around current operations and documentation.
Timely Preparation for Surprise Audit
Audits are necessary to ensure that government contractors maintain compliant systems and ethical financial activities. Audits can occur without advance notice. Businesses must operate under the assumption that they will be subjected to a thorough government audit.
The best thing government contractors can do is to maintain a state of readiness, anticipating that an auditor could come knocking on the door at any time. They should keep procedures concise and consistently inspect systems/documentation to confirm compliance to guarantee that the audit results will be a positive evaluation.
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