back to basics: good accounting & finance practices
TRANSCRIPT
Back To The Basics – Good Accounting & Finance Practices For Start-ups
Presented by: Jim Jenkins and Mike Lynch
22
Agenda
1. Sample dashboard: what solid accounting and clear metrics can tell you about your business
2. Accounting for Emerging, Early-stage and Pre-revenue companies
3. Potential Solutions
4. War Stories
SC&H Group
33
SC&H Group
44
Important Accounting for Early-Stage Companies
Track research and development expenses
DCAA- tracking costs and rates
Federal grants
• Tracking costs and expenses to specific grants
• When do you need an audit?
Accurate records for tax compliance
Carry forward Net-Operating Losses
SC&H Group
55
Maintain internal controls over all federal programs
Monitor activities
File all required reports (timely)
Ensure all required audits are performed
Follow up on any audit findings
With every GRANT award, there are 2 fundamental tasks:
Tracking project activity
Demonstrating compliance with grant conditions
As a Recipient of Federal Assistance, there are BASIC compliance expectations:
66
Defense Contract Audit AgencyMid-Atlantic Region, Fairfax Branch Office
December 11, 2015
Dear Contractor:
We received a request dated December 4, 2015 to perform a Pre-Award Accounting System Examination. The scope of our services will be based on auditor judgment, risk assessment and specific needs of the requestor.
Our examination will include…
(next slide)
In order for our office to begin performing this audit, we are requesting the information by provided by Wednesday, December 18, 2015.
Dear Mr./Ms. Contractor:
77
DCAA: “We’ll just need to see a few things…” Chart of accounts showing which
accounts comprise direct, indirect, and unallowable costs
Current organization chart
Listing of current contracts
Job cost summary ledger
General ledger
Labor distribution report
Payroll timesheets FY 2014, 2015 and current year
to date trial balance and income statement
Accounting system policies and procedures
Billing policies and procedures Direct and indirect rates (pools
and bases) and Unallowable costs policies and procedures• Written description of the contents
of each indirect cost pool and allocation base
• Most current detailed statement of indirect rates (should also contain a detail of the costs elements in each indirect cost pool and allocation base of that same period).
88
“And just a few clarifying questions…” Describe your accounting system software and provide user’s
manual.
Is your accounting system in accordance with GAAP?
Provide your current accounting policies and procedures.
What controls are in place in your accounting system that limits direct charging of indirect expenses?
Provide a list showing costs normally charged as direct and costs normally charged as indirect
Do the subsidiary job costs ledger or account receivable ledger accumulate costs by contract at a consistent level of detail?
Is your accounting system capable of calculating indirect rates? Can interim indirect expense rates be readily calculated from the books of accounts?
Is labor charged to intermediate and final cost objectives based on a timekeeping document?
Are timekeeping documents completed and certified by the employees and employees’ supervisors?
Is the labor cost distribution record reconcilable to payroll records?
Is the labor distribution system capable of tracing to a from the cost accumulation records in a labor subsidiary or general ledger account?
Explain and show policies on how costs are charged to books and records.
Provide policies and procedures for identification and exclusion of unallowable cost.
Please note that the trial balance and chart of accounts should show accounts that are considered as unallowable in terms of FAR Part 31.
Can the system be expanded to the requisite level of detail to show costs by contract line item number?
What procedures are followed to show cost by contract line item number?
Provide policies and procedures disclosing preproduction costs treatment.
Explain and provide Policies and Procedures on how your accounting system identifies contract limitation of costs.
Who is responsible for monitoring total contract expenditure against contract limitations on price or cost?
Can interim indirect expense rates be readily calculated?
Describe controls in place that would provide that interim bills of direct cost are prepared directly from the books and records.
Can billings be reconciled to the cost accounts for both current and cumulative amounts?
Provide policies and procedures on the payment of subcontractors and vendors.
Are there procedures to ensure that sub and vendor costs are only included in billings?
Is the contractor’s system capable of producing cost information at a sufficient level of detail to use in pricing follow on contracts?
Is your accounting system in full operation? If not, which portions are in operation and what is the status of implementing the full accounting system?
Describe your accounting department in terms of number of employees, qualifications of your staff, job titles and general duties and management oversight.
99
Excel
QuickBooks/QuickBase
Cloud Solutions provide a Control Structure
▫QuickBooks
▫Intacct
▫NetSuite
Great Plains, Deltek
DIY, outsourcing or in-house hire?
Spectrum of Solutions
1010
Do it right early on
It will save you money and sanity
It will make you a more effective business person
It will make you more appealing to potential funding sources
A few war stories:
Notification of the DCAA pre-award audit
The server crash
Quality of Earnings - each adjustment has a multiplier effect
Key Takeaways and a Few “War Stories”
Questions?
1212
Contact Information
Mike [email protected]
Angelo [email protected] Visit: www.scandh.com
Phone: (800) 921-8490Email: [email protected]