You didn't get into government contracting to become an accounting expert — but the accounting is where a lot of small contractors get tripped up. Waigand Strategic CPA works with small and mid-sized GovCon firms on the parts of accounting that ordinary bookkeepers and generalist CPAs don't handle.
Most of that work starts well before anyone mentions an audit: a chart of accounts that separates direct from indirect costs, spending tracked by contract, timekeeping that stands up to review, written policies defining your cost pools, and indirect rates calculated every year so you know which contracts actually make money.
Most small contractors are running on a standard small-business setup that was never designed for federal contracts. These four things are what make the difference — and they're far easier to build now than to retrofit later.
A GovCon chart of accounts splits direct contract costs from indirect pools — fringe, overhead, and G&A — so costs land in the right place as they're recorded, not through a cleanup exercise at year end.
Labor and other direct costs tracked by contract, task order, and CLIN, so you can see what each job is actually costing you — and back up every invoice you send.
Daily time entry, total time accounting across all hours worked, employee and supervisor approval, a record of changes, and labor distributed to the right projects. Timekeeping is where reviews most often find problems.
Costs that can't be billed to the government — and the FAR Part 31 list is longer than most people expect — recorded in their own accounts from the start, so they never work their way into a billed rate.
As more agencies move work to fixed-price and time-and-materials vehicles, fewer contractors face cost-type audits — and more of them are flying blind on profitability. Indirect rates aren't only a compliance exercise. They're how you find out whether the work is actually making money.
Gross margin — revenue minus direct costs — only tells you whether a contract covered the cost of delivering it. It says nothing about whether it covered its share of rent, insurance, admin salaries, business development, and everything else that keeps the company running.
A contract can show a healthy gross margin and still lose money once indirect costs are allocated to it. On a labor-driven T&M contract, the gap between a direct wage rate and a fully burdened cost per hour is often larger than the margin you think you're earning.
I calculate these annually for contractors who have no compliance requirement to — because it's the only honest read on profitability.
Auditors — and prime contractors doing their own due diligence — expect documented policies that are applied consistently, not case-by-case judgment calls. I help you put them in writing:
Contractors get flagged far more often for inconsistency than for one disallowed expense. A fringe pool whose methodology changes from quarter to quarter with no explanation looks like a control weakness — even when every dollar in it is legitimate.
If you hold a GSA Schedule, the contract comes with its own reporting obligations, separate from anything an agency asks for on a task order:
Schedule reporting is easy to treat as an administrative chore until the numbers don't tie to your books. Under-reporting means an unpaid fee; over-reporting means paying a fee on sales you never made. Either way, the fix is the same: report from the accounting system, reconcile every period, and keep the support.
Building the tracking into your chart of accounts up front makes each reporting cycle a short task instead of a reconstruction.
Yes, in the two ways that matter. First, you still need to know your fully burdened cost per hour, or you're pricing on gross margin and hoping. Second, the setup is what makes your next step possible: when a cost-reimbursable or larger opportunity comes up, the accounting system has to already be in shape. Building it in as you go costs a fraction of retrofitting it under deadline.
Indirect rate pools — fringe, overhead, G&A — have to be built and applied consistently under FAR Part 31 cost principles, and unallowable costs have to be screened out before they end up in a billed rate. I set up and maintain rate structures that hold together under scrutiny, and recalculate them annually against actuals.
Before you can be awarded a cost-reimbursable contract, your accounting system typically has to pass an SF1408 pre-award survey. I write the policies and procedures and run an independent readiness check before the government does, so you're not finding out about a gap during the actual survey.
Schedule sales reporting and the Industrial Funding Fee should come straight out of your books. I set up sales tracking by contract and SIN, reconcile reported sales to your general ledger each period, and document the support behind what you filed.
No. There's no such thing as a certified “DCAA-compliant” consultant — it's industry shorthand, not a credential. What matters is whether the person doing the work has actually done GovCon accounting. I have.
Most bookkeepers are perfectly good at recording transactions; very few have built an indirect rate structure or defended a cost. The risk isn't a messy ledger — it's billing a rate you can't support, pricing work you don't understand the true cost of, or having a contracting officer ask a question your records can't answer.
Practical, checklist-driven reading on the two questions small GovCon firms ask most.
Why DCAA's standards matter even without a DoD contract, the policies auditors expect to see, and how to keep small errors from becoming patterns.
Read the guide →The gross margin trap, a worked example showing a “profitable” contract losing money per hour, and how to calculate rates without a DCAA-grade system.
Read the guide →GovCon services are quoted separately from the monthly plans. See Services & Pricing →
Small contractors are usually too small for a national firm to prioritize and too specialized for a generalist bookkeeper to handle well. Government contracting is a core focus of my practice — the accounting requirements that come with federal contracts are something I specialize in, not a side service.
And whether you're preparing for a cost-reimbursable award or running entirely fixed-price work, the starting point is the same: a system that records costs correctly the first time, and rates that tell you the truth about your margins.
Whether you need rates calculated, policies written, Schedule reporting cleaned up, or your books set up right from the start, a short discovery call is the best place to begin.