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Overview of Provisional Billing Rates
Chuck Anderson and Associates at govIRG • Oct 04, 2024
Government contractors with cost-reimbursable contracts are required to submit provisional billing rates (PBRs) annually. While this may seem like a tedious compliance requirement, it’s actually an exercise that all companies should perform in some form. The insights gained not only help with billing on cost-reimbursable contracts but also offer a deeper understanding of a company’s finances.
Developing PBRs is essentially a budgeting exercise that provides indirect rates representing the company’s break-even point. These rates are then used for invoicing on cost-reimbursable contracts in the following year. There are various ways to determine these rates, but the key requirement is that the process be well-documented and the data organized in a clear, intuitive format.
Before starting the budgeting process, it’s crucial to ensure your Chart of Accounts (COA) is structured to categorize costs by “objective.” Typically, this structure will divide your COA into sections for recording costs such as Direct, Fringe, Overhead, G&A, and Unallowable. With this setup, you can easily identify and present the necessary details for calculating and submitting your PBRs.
The budgeting process itself will vary based on the size, structure, and complexity of your business. The goal is to balance the time and cost of developing the budget with the accuracy of the results. govIRG can help you find the “sweet spot” to deliver an accurate forecast with the right level of effort.
Our team can support this process at whatever level is appropriate for your company. Whether you need simple calculations and presentation or a deep dive into the details, we have the expertise to help you efficiently and accurately prepare your annual PBR.
Government contractors operate in a world where compliance is key. While developing PBRs may seem like a compliance obstacle, it’s actually a great opportunity to improve your company’s management. govIRG’s comprehensive approach to compliance management helps contractors avoid cash flow issues, stay compliant with government regulations, and ultimately increase the value of their business.
Government contractors with cost-reimbursable contracts are required to submit provisional billing rates (PBRs) annually. While this may seem like a tedious compliance requirement, it’s actually an exercise that all companies should perform in some form. The insights gained not only help with billing on cost-reimbursable contracts but also offer a deeper understanding of a company’s finances. Developing PBRs is essentially a budgeting exercise that provides indirect rates representing the company’s break-even point. These rates are then used for invoicing on cost-reimbursable contracts in the following year. There are various ways to determine these rates, but the key requirement is that the process be well-documented and the data organized in a clear, intuitive format. Before starting the budgeting process, it’s crucial to ensure your Chart of Accounts (COA) is structured to categorize costs by “objective.” Typically, this structure will divide your COA into sections for recording costs such as Direct, Fringe, Overhead, G&A, and Unallowable. With this setup, you can easily identify and present the necessary details for calculating and submitting your PBRs. The budgeting process itself will vary based on the size, structure, and complexity of your business. The goal is to balance the time and cost of developing the budget with the accuracy of the results. govIRG can help you find the “sweet spot” to deliver an accurate forecast with the right level of effort. Our team can support this process at whatever level is appropriate for your company. Whether you need simple calculations and presentation or a deep dive into the details, we have the expertise to help you efficiently and accurately prepare your annual PBR. Government contractors operate in a world where compliance is key. While developing PBRs may seem like a compliance obstacle, it’s actually a great opportunity to improve your company’s management. govIRG’s comprehensive approach to compliance management helps contractors avoid cash flow issues, stay compliant with government regulations, and ultimately increase the value of their business.
SBIR , or Small Business Innovation Research , and STTR , or Small Business Technology Transfer , are government-funded programs designed to engage small businesses in research and development efforts across the United States. These programs aim to boost the commercialization of federally funded research, enhance national investment, and foster technological innovation. The difference between SBIR and STTR The SBIR program is a three-phase award system that offers qualified small businesses the opportunity to propose innovative solutions that address the federal government’s specific research and development needs. The three phases are as follows: Phase I focuses on creating a proof of concept for the innovation; Phase II involves continuing research and development efforts; and Phase III is dedicated to pursuing commercialization in the private sector. STTR is intended to promote technology transfer by facilitating cooperative research and development between small businesses and research institutions. The key distinction from SBIR is that STTR requires the small business to formally partner with a research institution. At the time you apply for a SBIR you might also be eligible for “TABA (Technical and Business Assistance)” funds that is in addition to the SBIR funding to help you with your IP (Intellectual Property), Accounting System setup, and other things. You might also be eligible for R&D (Research & Development) Credits when you win an SBIR. GovIRG is committed to helping businesses thrive by simplifying compliance and increasing their business value. Our goal is to help businesses understand the available options and resources that can set them on the path to success. Some of this article references information found from SBIR.gov and U.S. Department of Education.
In the world of government contracting, meticulous financial management is not just a best practice; it's a regulatory requirement. Whether you're a small startup or a seasoned contractor, selecting the right accounting system is crucial for maintaining compliance, optimizing operations, and driving growth. However, with a myriad of options available, how do you determine which system aligns best with your business goals and contract types? Let's delve into the essentials. Note about pricing: While QuickBooks and other accounting systems may appear comparable in price, it's essential to consider the total cost of ownership, including factors beyond the initial software purchase. QuickBooks may seem more affordable upfront, businesses need to also factor in the potential long-term costs associated with scalability, additional modules, and integrations required as the business expands. Though the learning curve to understand and fully leverage the capabilities of robust accounting systems can be steeper compared to QuickBooks. Investing in training and implementation support can bridge this gap, unlocking the full potential of advanced features and functionalities. Understanding Your Business Goals Before diving into the intricacies of various accounting systems, it's imperative to clarify your business objectives. Are you dipping your toes into government contracting with uncertain long-term plans? Or, do you have a clear vision and strategic goals for expanding your presence in the sector? Your answers to these questions will significantly influence your choice of accounting software. For Uncertain Ventures: QuickBooks If your company's goals in government contracting are still nebulous and uncertain, QuickBooks can be a solid solution. QuickBooks is renowned for its user-friendly interface, affordability, and versatility, making it an ideal choice for small businesses exploring new avenues. Its intuitive design allows even accounting novices to manage finances effectively. Moreover, QuickBooks offers features tailored to government contractors, such as job costing, time tracking, and invoicing, providing basic functionalities necessary for compliance and project management. For businesses unsure about their long-term commitment to government contracting, QuickBooks offers a low-risk entry point with sufficient capabilities to meet initial needs. For Strategic Growth: Robust Accounting Systems On the other hand, if your company is committed to government contracting and has clear growth objectives, investing in a more robust accounting system becomes imperative. While QuickBooks suffices for basic requirements, it may fall short in handling the complexities of government contracts, such as stringent compliance regulations, project accounting, indirect cost allocations, and audit readiness. Robust accounting systems, such as Unanet, JAMIS, Deltek Costpoint, or Business Central offer comprehensive solutions tailored specifically for government contractors. These systems provide advanced functionalities, including contract management, timekeeping, expense tracking, cost allocation, and reporting capabilities customized for government contract compliance. Benefits of a Strategic Accounting System 1. Enhanced Efficiency: Robust accounting systems streamline processes, automate repetitive tasks, and integrate disparate functions, reducing manual errors and freeing up valuable time for strategic initiatives. 2. Compliance Assurance: With built-in compliance features and robust reporting capabilities, advanced accounting systems ensure adherence to complex government regulations, mitigating the risk of costly penalties and contract disputes. 3. Scalability and Flexibility: As your government contracting business grows, a scalable accounting system can easily adapt to evolving needs, accommodating increased transaction volumes, additional contract complexities, and organizational expansion. 4. Data-driven Decision Making: Advanced reporting and analytics empower informed decision-making by providing real-time insights into project profitability, cash flow management, resource allocation, and contract performance. Embracing the Era of Real-time Information In today's fast-paced business environment, access to real-time financial information is no longer a luxury but a necessity. Small government contracting businesses can now afford to have critical financial data at their fingertips, enabling proactive decision-making and agile responses to market dynamics. By investing in a strategic accounting system aligned with your business goals, contract types, and growth aspirations, you can unlock new opportunities, mitigate risks, and establish a solid foundation for long-term success in the government contracting arena. In conclusion, while QuickBooks may suffice for initial explorations, businesses committed to government contracting should consider transitioning to a robust accounting system to maximize efficiency, ensure compliance, and fuel strategic growth. By making informed choices based on your unique goals and contract types, you can position your business for success in the dynamic world of government contracting.