A Guide to Incurred Cost Submissions

Obtaining a contract with the Department of Defense (DoD) can be a great win for any business. When you do have a contract with the DoD, you can typically expect that it will be long-lasting and provide you with a good revenue stream. As part of signing any DoD contract, you will need to fully understand your requirements for seeking reimbursement for costs. Part of this can include knowing how to follow the proper protocol for incurred cost submissions.

Why Do You Need to Submit Incurred Costs?

The DoD frequently has contracts with companies that will provide a reimbursement for costs incurred by the company. This can include wages, benefit allocations, material and inventory costs, and other expenses related to providing the product or service. Due to the size of the DoD, they frequently partner with the Defense Contract Audit Agency (DCAA) for routine and targeted audits. These audits will seek to ensure that the incurred costs were filed properly and accurately. This is why companies who work on government contracts must ensure that all processes remain DCAA compliant, in the case that an audit is performed.

What Are Examples Of Incurred Costs?

When you are going to submit an incurred cost report, it is important to know what costs are frequently included. In general, incurred costs should be any costs that were necessary for you to provide the DoD with the agreed products or services. These can include direct costs such as labor, benefits, and materials. It can also include indirect costs such as allocation of overhead spending, security, and administration. The programs offered by Hour Timesheet can help you better understand what your incurred costs are, by making it easier for employees and contractors to track the proper time. Plus, Hour Timesheet integrates directly with QuickBooks , Gusto and ADP, to make payroll and accounting processes more efficient.

Who Is Required To Submit An Incurred Cost Submission?

An incurred cost submission is generally required for any vendor that performs services for the DoD. There are carve-outs for this requirement that could change your requirement based on the type of contract that you have in place. Most of the time, you will need to have these reports sent in by June 30 following the end of the prior fiscal year.

What Needs To Be Included In The Submission?

The purpose of the submission is to ensure that you are reimbursed for any costs that you incurred for providing the service to the DoD. You should always include all direct costs and provide any information that you have to support your expenses. This typically will largely include receipts from inventory suppliers as well as payroll registers. The products and services offered by Hour Timesheet can help make it easier to keep records and stay DCAA compliant while ensuring the right information is included in your cost submission.

There are also going to be indirect costs that can be harder to allocate. For these, it is important to list all of your indirect costs and also complete any supporting schedules that are needed to validate the costs you incurred as well as the fair amount to have reimbursed for the DoD.

What Happens If I Am Audited By The DCAA?

The DCAA frequently audits vendors. These can be random, targeted, or completed on vendors that have not gone through the process in a while. A large part of the process for a DCAA audit will aim to verify that the internal cost submissions were fair and accurate. To ensure that you are prepared, you should always keep your records and supporting schedules handy so you are able to answer any questions that can arise. Completing your own internal audits can also help with overall preparation. If you’re not sure your company meets DCAA compliance requirements, Hour Timesheet offers resources to help.

Ultimately, having a contract with the Department of Defense can be a great deal for any business. While there are a lot of opportunities to grow with the DoD, the contracts can be complicated and often require that you send in an incurred cost submission at least once per year. This will be a large factor in determining the revenue you receive as part of the contract. When you need help with your incurred cost submissions or any other support with your DoD contract, contact Hour Timesheet to learn how we can help your company with DCAA compliance.

DCAA Compliance With QuickBooks Software

When you are in the business of federal government contracts, DCAA compliance is non-negotiable. DCAA stands for the Defense Contract Audit Agency. QuickBooks provides an accounting package that is well suited for small to mid-sized businesses looking for DCAA compliance. QuickBooks offers two options and several different versions depending on your unique business requirements. QuickBooks offers both a desktop solution and an online tool, and either can be set up to be DCAA/Federal Acquisition Regulation (FAR) Compliant, especially with our DCAA compliance checklist. The keys are Job Costing and Labor Distribution.

DCAA Contracts

Potential government contractors who wish to bid on certain types of contracts should know that although the contracts vary, there is a difference between direct costs and indirect costs.

A direct cost is a cost that can be tied directly to the production of goods or services. A direct cost may be variable. An example of a direct cost is labor cost or manufacturing supplies.

Indirect cost allocations include overhead expenses such as rent and insurances and general expenses like accounting department costs. Indirect costs are harder to pin down and harder to allocate to a specific project or item. Using a timesheet tracking application in conjunction with an accounting package like QuickBooks, you can better control the indirect cost allocations, particularly for general and administrative expenses, to the correct cost objective.

One type of DCAA contract is called a cost reimbursable contract, where the direct cost and a percentage of the indirect costs are paid. This type of contract requires the accounting system approval under FAR subpart 16.3.

What is QuickBooks?

QuickBooks is an accounting software solution that allows for integration across multiple platforms to make payroll quick and easy. They have two main products that make their service worthwhile.

QuickBooks Desktop

This interface of web-based time tracking software and payroll makes QuickBooks Desktop an ideal tool for DCAA Compliance. We base this on our experience with hundreds of clients over several decades. Furthermore, the QuickBooks Desktop integrated payroll module permits the charging of time directly to the General Ledger. This includes Customer, Job, and Service Items, which are immensely beneficial.

QuickBooks Online

QuickBooks Online is a cloud-based solution that is not, at the outset, designed to meet the FAR and DCAA requirements and has some limitations. The good news is that there are ways to make the QuickBooks Online system meet all the government’s requirements without too much effort.

What is DCAA Compliant Accounting Software?

DCAA-compliant accounting software is software that meets DCAA requirements. Your chosen accounting package – in this case, QuickBooks is set up to meet the requirements. Timekeeping and the allocation of costs are of particular importance. Consequently, QuickBooks Time Tracking software integration is an essential aspect of DCAA compliance.

Refer to DCAA compliance explained for more information.

Any accounting package set up to meet compliance requirements will be subject to strict internal controls to ensure financial integrity. One of these internal controls should be an internal accounting system audit regularly. There should also be regular checks on a monthly basis to see that all the income and expenditures balance.

The Benefits of Being DCAA Compliant for Small Businesses

If you are DCAA compliant, you may be one step closer to securing funding from the federal government programs SBIR and STTR. These programs gear towards supporting innovation and technology in small businesses. QuickBooks with Hour Timesheet will be invaluable in pursuing this kind of opportunity.

Is QuickBooks DCAA Compliant?

Yes, QuickBooks can be set up to be DCAA compliant. There are three areas to consider:

Chart of Accounts establishment

Flow of transactions

Cost and Computations

It’s important to note that one should always bear Generally Accepted Accounting Principles (GAAP) in mind when analyzing your accounting system.

Even if you understand all the regulations, it is still best to refer to the DCAA compliance checklist. Where possible, seek professional assistance! Be ready to implement policies and procedures that need to be applied consistently across your business.

Keys to Compliance

Employee time tracking posted daily with required explanations for edits and record locking.

Printable timesheet reports.

Policies & Procedures oriented toward FAR Compliance Criteria found in DCAA’s SF-1408 pre-award audit checklist.

Consistently applied labor dollar distribution accommodating uncompensated OT for salary exempt personnel.

Indirect Cost Pools and the ability to compute and forecast Indirect Rates applied to Direct Costs under Cost Reimbursable Awards.

Progress billing + Cumulative dollar values reported against award ceilings tied to cost proposals.

Identification and segregation of Unallowable Costs as defined per FAR 31.205.

This isn’t a comprehensive list, but it gives a good idea of what to expect. One of the best ways to help navigate DCAA compliance with timekeeping and accounting systems is to partner with a company that has a demonstrated knowledge of government contracts. It can also be helpful to review multiple services and look for important features in DCAA compliant time tracking systems.

What Happens if You Fail a DCAA Audit?

You may lose your contract or face a suspension of payment. Be assiduously aware of remaining compliant. Floor checks are routine, and timekeeping records are an essential part of your compliance. A floor check is the DCAA’s way of verifying your employees.

One way to help ensure you pass your DCAA audit is to get any requested information to your auditors quickly. This can speed up your audit, and help ensure the DCAA auditor has all the information they need. In order to do this, it’s best practice to keep excellent records and track every process and transaction. Hour Timesheet allows businesses to keep these kinds of records, in a convenient, cloud-based place.

We Can Help

Hour Timesheet isn’t just a timekeeping software provider for government contracts looking to pass a DCAA audit. We also partner with dozens of CPA firms and consultants who can assist you with the entire life cycle of getting a DCAA-approved accounting system. Give us a call today! We can introduce you to our extensive list of experienced partners.

DCAA Compliance Checklist for Time Tracking

Government contract work can be lucrative and fascinating work. Navigating the government contract process can be very tricky. It’s important to stay up to date on Defense Contract Audit Agency (DCAA) compliance regulations. It’s also critical to ensure you meet DCAA timekeeping requirements if you want to work with any federal government organization. Hour Timesheet does our best to explain DCAA compliance and we offer a product that is always up to date with regulations. The DCAA will run a pre-award audit in order to award any government contracts. You should prepare for this audit and create a list of compliance regulations for the DCAA.

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What is DCAA compliance?

The DCAA was established in the 1960s to normalize the government’s contract auditing process, and to ensure the American taxpayer was getting good value for its money.

Initially, the DCAA was originally overseeing military and intelligence contracts for the U.S. Department of Defense. Later, it oversaw many other kinds of labor and service contracts that the federal government signs with commercial suppliers.

If and when you win a government contract, the DCAA timesheet compliance rules will apply to everyone in your company. Regardless of the size of your organization, this can be a big task with many training implications. It’s worth your while to make DCAA compliant time tracking as straightforward as possible. Do your research ahead of time, and try to create a DCAA compliance checklist.

Suppose the DCAA were ever to audit you. In that case, they would check three main areas to see if you comply: how accounts are established, the flow of transactions in accounting systems, and the computations derived from them.

Ready to try out Hour Timesheet’s DCAA compliant timesheet software?

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1. How Accounts are Established

A DCAA Compliant Chart of Accounts

You will need to separate which financial transactions are direct, indirect, and unallowable. The DCAA will also examine your Chart of Accounts to ensure you’re adhering to the Generally Accepted Accounting Principles (GAAP). Having Accounts Payable, Prepaid Expenses, and Unearned Revenue will indicate that you’re accounting for cost and revenue on an accrual basis.

2. The Flow of Transactions in Accounting System

Trial Balance Hour Timesheet will allow you to print a Trial Balance that summarizes your accounts’ debits and credit balances. The latter will reveal details such as the opening balance, transactions, transfers, and closing balance. The former will summarize the debits and credit balances on each of your accounts.

General Ledger Detail The general ledger detail within the Hour Timesheet software will be able to provide you with the beginning balances for each government contract over a limited period.

3. Cost & Reporting

The DCAA will audit processes used for allocating revenue and costs to projects, in addition to the way you calculate indirect rates. Many companies use QuickBooks for most of their accounting, and Hour Timesheet makes sure this doesn’t have to change. We can help make your QuickBooks DCAA complaint, ensuring it follows the rules laid out so far, and the following rules about computing revenue and expenses.

Loss & Profit by Job An essential requirement highlighted in the pre-award survey is your accounting system’s ability to accumulate costs by project. Loss & Profit by Job reports gives assurance that this can be done accurately when they agree with the standard Profit & Loss statements. Hour Timesheet also integrates directly with ADP and QuickBooks. This will help lessen manual data entry across platforms.

Labor Distribution Report Labor distribution is the process of allocating and measuring labor costs both direct and indirect to the total time recorded on timesheets. Hour Timesheet allows you to directly tie both direct and indirect hours to the accounts within your accounting system. DCAA needs to see that labor costs are equally distributed among customers, both government and commercial. They want to know that no one is favored or has received a cost subsidy.

Contract Backlog Report This type of summary allows you to see the percentage of work completed. It also shows the remaining cost to complete each job in your backlog. This type of report indicates how much money is left on a contract, as well as potential contract overrun. It also shows if there are corrective actions required as a result.

Direct Vs Indirect Labor Tracking Contract employees must consistently track both direct and indirect costs. A direct cost is identifiable to one and only one cost objective. It is normally required or necessary for contract performance. Cost objective is a regulatory term that can include a contract, a project, a task, a contract line item.

To be compliant, government contractors must accumulate costs into indirect cost pools. This can be things such as a bid and proposal or an independent research and development project. Hour Timesheet allows a contractor to track time and keep track of all accumulated costs. This is all costs related to hours worked, such as direct costs, any unallowable costs, or indirect costs. Indirect costs are all costs that are not identifiable or incurred for the benefit of one cost objective.

There are many tasks involved in preparing for DCAA auditors to analyze your accounting functions. It can be helpful to create a compliance checklist for government contracting work. Especially if you’re business is receiving government funding, such as through the SBIR and STTR programs. It’s vital that the companies participating remain DCAA compliant in order to receive their funding.

Overall, it’s important to maintain audit trails and detailed reports for all employee timesheets and time accounting. Also, make sure to always use a DCAA compliant time entry.

Hour Timesheet and DCAA Compliance Resources

Achieving DCAA audit compliance takes effort, time, and specialist knowledge. Even if you understand the regulations, you’ll also need to arrange your Chart of Accounts and configure Hour Timesheet accordingly. Having a DCAA timecard audit checklist can help you achieve DCAA compliant timekeeping, without all of the confusion. Even better, choosing a timekeeping system with DCAA-compliant features will help you in the long run.

Contact us today for a free, no commitment, 30-day trial of our software. With our years of experience, we can help you avoid potential DCAA compliance issues before an audit begins.

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Top 5 Reasons You Need a Time Card Calculator

As the owner of a business you certainly understand one of the most tedious parts of running your organization is calculating timecards. When you think of all the things you have to do including creating and executing your marketing strategy, maintaining your inventory and simply ensuring the company operates smoothly, the last thing you feel like doing is calculating time cards. Besides who has time to do it? That’s why a time card calculator is so incredibly invaluable and where Hour Timesheet can help.

Hour Timesheet’s Time Card Calculators

At Hour Timesheet we have time card calculators that can alleviate the stress and strain of tracking employees’ hours. Our calculators accurately track and total timecard hours automatically. They can eliminate unwanted overtime with their programmable clock-in and out rules. Our calculators can be simply installed on your PC, Mac, Windows tablet or portable Smart device.

Saves Time & Money

The biggest advantage of using a time card calculator is that it saves time and money. Either you or your Human Resources Department will save both time and money collecting, calculating, correcting and processing employee timesheet. Instead thanks to the online calculator it will significantly reduce the time it takes to do this. Using a calculator will enable employees to focus on their jobs at hands. They will no longer have to worry about tracking and recording the time they spend working each day, week or month and can dedicate their time on what they were hired to do-work!

Reduces the chance for errors

If you take a moment and think about the opportunity for errors when you’re recording and calculating employee hours, especially when factors such as overtime, and holidays are all factored into the equation you begin to realize how easy it is to make an error. Something as easy as a misplaced decimal can lead to a serious accounting error and a serious loss of income for an employee. Not to mention a problem for you! It goes without saying that time calculations for payroll must be accurate. Your employees depend on those results and you depend on them to ensure your business runs smoothly. Our time card calculator does the math for you automatically. Instead of having to manually using one, our time tracking calculator reduces human error and helps prevent any miscalculations. The result is that your employees get paid what they’re entitled to and you can rest assured it’s accurate.

Encourages Compliance

There are state and federal labor laws that were created to help control things like record keeping, overtime and wages. Yet, these can be difficult to track and keep up with, particularly if you’re using an outdated employee time and attendance system. Hour Timesheet’s timecard calculator can help your business adhere to these laws. It can even help owners and managers use break times and overtime options that are provided as an added feature to ensure they are staying compliant.

Discourages Time Theft

Time theft sounds harmless enough unfortunately it’s far more detrimental than one would think. First it comes in many forms including taking a longer coffee or lunch break than allotted. Or clocking-in a friend when they’re going to be late to work. Whether the action is intentional or not, it can cost you the business owner or manager a tremendous amount of money. At Hour Timesheet, by using our time card calculators in conjunctions with automated time and attendance systems, you can help stop time theft in its tracks.

Time Card Calculators – A Useful Tool for Business

There are some business owners or managers who argue that a time card calculator is a useful tool for their enterprise. At Hour Timesheet we say they are an essential item. A time tracking calculator is easy-to-use and improves the efficiency with which your business operates. Not only does it reduce errors, but it saves you time, money, increases compliance and discourages time theft. Who wouldn’t want a tool in their business arsenal that does that?

DCAA Compliant Timesheet Integration with QuickBooks and ADP

Three Solutions Working Together – If you use ADP Run, ADP Total Source or ADP Workforce Now as your payroll provider and do your invoicing in QuickBooks, you’re in luck. The Hour Timesheet integration with QuickBooks and ADP is simple and fully DCAA Compliant. This time tracking software gives you everything you need to track time & attendance, create invoices, and do payroll in minutes without having to key in data.

Hour Timesheet includes a feature-rich time and attendance solution and mobile functionality that is geared for small businesses. Our SaaS solutions give your organization affordable, easy-to-use web-based solutions. Plus, our timekeeping software is fully DCAA compliant. Our professional services are designed to help your time tracking and accounting stay organized and prepared in the event of a DCAA audit.

Main Features & Benefits of Hour Timesheet Payroll Integration

Mobile App (iOS and Android) –Hour Timesheet offers mobile time tracking in the Hour Timesheet Mobile App. As a result, Hour Timesheet integration with QuickBooks and ADP is easier than ever.

Managing Employee Leave – Manage leave balances, track leave or time off requests, and more directly in Hour Timesheet’s software. All data is stored and tracked, and easily transferable between platforms.

Manage Overtime Hours- Aside from tracking regular hours and job performance, the time tracking software complies with all DOL overtime regulations.

Job Costing – Track and manage job costs, labor costs, and other information directly on the platform. You can view employee profiles, job codes, and other payroll processes.

Quick Access to Time Cards – Hour Timesheet is a SaaS solution, so employee timesheets are stored safely. To-the-second, real-time data is ready and available on the cloud whenever you need it. Hour Timesheet makes extra efforts to ensure all employee time entries are accurate, on time, and employee attendance can improve.

Daily Time Entry Reminders – Hour Timesheet uses daily reminders and notifications to ensure all employees are tracking time as they’re doing it, rather than after the fact.

Location Tracking – Available on the Hour Timesheet mobile app, managers can keep track of employee location when working at home or off-site.

Quick Payroll Processing – With Hour Timesheet and ADP Platform integration, you eliminate the double-entry of data and ensure that your staff is paid accurately and on time.

Time To Eliminate Data Entry For Good – The QuickBooks “one-click” sync imports employee data and customer/job data into Hour Timesheet for quick employee profile setup. No more manual data entry for every new job or contract.

Decades of Experience At Your Fingertips

The 25 years of experience you get by choosing Hour Timesheet means that you’ll have experienced, knowledgeable customer service at your fingertips. We’re always ready and eager to help you troubleshoot your way through any problem or figure out new ways we can help your business succeed! Even if you’re not a government contractor looking to achieve DCAA compliance and prepare for DCAA audits, Hour Timesheet can help your business save time. If you’re unsure, request a demo today to see what Hour Timesheet can do for your business.

Detailed Audit Trail

Daily Timesheet Reminders

Correction Timesheet Workflow

Required Reason for late or edited entries

Supervisor Approvals

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Want Help With Your Account?

If you’d like help getting the ADP or QuickBooks Time Tracking integration setup, we’ve got you covered. We’ll be right there with you via phone, email, or screen-sharing session to make sure you are successful. Call us anytime at 832.942.9556.

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