Signs your GovCon business has outgrown QuickBooks

Government contractors know that Defense Contract Audit Agency (DCAA) compliance is essential for getting – and keeping – those lucrative federal contracts. Even if you only have one government contract at any given time, your entire accounting system and business must be ready to pass DCAA audits.

Although DCAA compliance relates to more than just your accounting system, many of their standards relate directly to your accounting practices – making it imperative that your system is set up for compliance from the start.

Is QuickBooks the best accounting system for GovCons?

QuickBooks is a standard accounting system for small- and medium-sized companies. In fact, many smaller companies consider it the gold standard because you find it everywhere, and it is user-friendly, has an affordable price point, and is widely available.

However, although any system can be set up for DCAA compliance, QuickBooks is not designed with GovCons in mind. There are issues unique to the federal space that QuickBooks does not cover, such as managing costs as direct or indirect, allowable or unallowable, at the lowest work breakdown structure (WBS), or dealing with indirect costs and mandated billing formats (DD250, 1034/1035).

Many GovCons find they must utilize third-party software and additional spreadsheets for offline workarounds and manual report development – and any missteps can lead to audit trouble.

Signs you may have outgrown QuickBooks

Examine your company’s current practices to see if there are signs you have outgrown QuickBooks.

1. Manual processes. Are you gathering data from disparate systems and manually entering it into QuickBooks? Or pulling data out of QuickBooks for analysis in Excel or other software? A little of this is okay for a while, but you’ll start to make mistakes as you grow and have more and more contracts and spreadsheets.
2. Spreadsheet reliance. Does staff waste time playing “find the right spreadsheet” to make sure they’re working off the most current spreadsheet? This can lead to errors and audit problems.
3. Disparate systems. Are you using several systems to manage the business? Ideally, all ERP functions should be in one place – accounting, inventory, and assets at the very least. CRM and HR are often handled by specialty software, but if you’re not doing all financials in one place, you’re likely wasting time and possibly creating errors and problems.
4. Few user licenses. A standard ERP solution will likely provide a license for every employee. Then, the company decides what level of access that includes, giving project managers, HR, and management access to reporting, planning, and budgeting systems – allowing for collaboration and overall sync.
5. Compliance. The unique requirements for government contracting become difficult to manage in QuickBooks. Because most of the work is done manually offline, you must stay on top of requirements versus the software being designed and built for it.
6. Lack of in-depth reporting capabilities. When accounting is forced to rely on spreadsheets for reporting, the results are often error-prone, and gathering data is labor-intensive.

The disadvantages of QuickBooks 

Because QuickBooks lacks the capability to perform DCAA-compliant functions, you must use expensive plug-ins, additional third-party systems and software to check all the boxes required to pass a DCAA audit. Using multiple applications, various platforms, and systems that don’t “speak” to one another could be adding unnecessary hours and stress to your accounting management practices.

Smaller businesses with only one or two government contracts may not mind the added work when using QuickBooks – but they may not realize that this system is not primed to help them grow and gain more lucrative contracts in the future.

Find the right software solution

The cost and energy required for upgrading to a new system can feel beyond reach. But can you afford to put it off? Consider the costs of noncompliance, wasted time, and low morale. There are solutions that eliminate the wasted time spent to stay compliant – and let you focus on more meaningful work.

CohnReznick will evaluate your company’s needs and offer the right solution for your accounting software issues. Contact our team to get started.