A year-end guide for small and mid-sized GovCons

If you are a small to mid-sized government contractor, this time of the year is probably the most daunting for you. It’s a period riddled with big and small challenges alike – between managing limited resources and an unending list of to-dos. 

While it may seem like you’re running against time, all that’s needed is some prudent planning and a focus on short-term priorities that account for longer-term gains. 

You may feel burdened with deadlines, evaluations, and strategic decisions, but you must equally prioritize assessing and streamlining your operational processes, strengthening relationships, and setting the foundations for success in the coming year.

Below, I outline a three-stage guide to help you easily navigate the year-end complexities with confidence.

Stage One: Creatively Curb Challenges

The year-end challenges offer small and mid-sized government contractors the opportunity to rely on tools and technologies to manage some run-of-the mill challenges. For example, many contractors who operate on biweekly or weekly timesheets have difficulty precisely managing time data.

Making sure all hours are reported by the end of the year, recording any salary adjustments and accruals helps correctly recognizing costs and revenue which further supports timely book closure and provides a clear reflection of the expenses. Similarly, they can face staffing shortages, owing to the holiday season, and resource constraints during this time. 

To prevent these hurdles from complicating operational priorities such as compliance, payroll, and contract renewals, businesses can tap simple, cost-efficient solutions. By introducing automation to the processes such as timekeeping and payroll, government contractors can streamline workload, introduce accuracy, and allow teams to focus on strategic tasks. 

Automating tools can also play a critical role in ensuring your financial records are in order - including robust verification of invoices. This also means you have the ability to proactively address invoices and payments with clients to prevent financial bottlenecks and ensure smoother cash flow management.

Furthermore, small and mid-sized businesses often use this time to make decisions around business changes, including intra-divisional structuring and restructuring decisions. This further validates the need for efficient budget and actual recording tools.

Oftentimes, mid-sized businesses are embracing new financial models and changes during this time. This  requires a thorough look at how budgets are estimated and actuals are recorded.

I recommend embracing a more modernized accounting structure, indirect cost allocation models – like revising the chart of accountants, updating budget models, thus increasing the ability to accurately forecast and compare actuals to budgeted figures. 

Stage Two: Prudently Prepare and Plan

In the spirit of planning ahead, I advise government contractors to embrace a culture of assessment and reviews to streamline their business priorities for growth as well as client and team retention. This includes reviewing management reports, and exploring potential adjustments to the company structure to achieve competitive wrap rates.

Similar to the performance evaluation of your internal team, this is an important time to gather client feedback on your performance. By collecting your customers’ honest feedback, you can not only help strengthen relationships but also determine their continuity with your business. Additionally, it helps with resource planning for the next year.

Budgeting and forecasting are crucial as this exercise allows you to review your financial position, and simultaneously plan ahead across all business verticals. This involves  clients’ project-specific budgets and also strategically allocating company-wide indirect expenses and Annual Operating Plans (AOP). These steps equip you with the ability to streamline your costs, while identifying untapped opportunities. 

During this period, you can anticipate year-end financial audits. You must, therefore, ensure your documents are in order and that they adhere to all the regulatory standards before submitting them.

To avoid unplanned financial, reputational or operational hurdles, paying attention to details like accurate timekeeping, indirect cost allocations, and financial reports can be critical. 

Stage Three: Finesse Your Foundations

Most businesses want the upcoming year to be better than the one before. To ensure this outcome, some key infrastructural elements are critical. For example, businesses must have project-based ERP systems in place to properly record time, account for salary adjustments, track expenses, record subcontractor time, and expenses to name a few. 

If you are a small and mid-size business, it’s all the more important that you have an eye on your cash flow. For this, your ERP system should be able to track contract value and fundings, billed amounts, backlogs, and forecasts. 

You should also assess whether the current existing structure of cost pools accurately align with your business growth. Streamlining indirect cost allocations such as fringe, intermediate pool expenses, overheads, and general administrative expenses in detail specific to business departments, can result in competitive wrap rates and can paint a clearer picture of the profitability by project and department.

During this time, you should also prioritize investments in HRIS systems, CRM tools, IT-related infrastructure, and recruiting and talent management tools.

Looking Ahead

This is a demanding, yet rewarding time for all government contractors. By embracing a “growth by review and assessment” mindset, you can bolster your performance, strengthen relationships with government agencies, and refine your financial and operational practices.

Use this time to evaluate how your company has performed throughout the year and areas of improvement for the upcoming one.

Let this critical period set the stage for a strategy-driven future for your business.