Best Timesheet Practices for Small Government Contractors

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time clockThe biggest mistake small government contractors make is not keeping track of all time worked. This robs you of vital business information!

It is a fact of life that business owners often spend all day working on billable client projects and then spend evenings or weekends writing checks, calculating payroll, preparing client invoices and writing proposals. How much of your time could be freed up to do business development or other growth activities? You’ll never know if you don’t write it down consistently.

When you achieve your hard-earned growth, you may wish to add staff to perform some of these business support functions.  Will you need a full-time or part-time person? Should you outsource?

Recording all time worked is also an ironclad requirement for government contractors. It applies to everyone equally, including owners and both salaried and hourly employees.  There are no exceptions and little tolerance for poor practices. If you currently have a mix of government and commercial customers, the requirement applies to both types of contracts, so you need to get this right. If you are providing professional services to your customers, this is your bread and butter.

Where to Start

First – Lead by example. Reinforce, and reward in any way that is effective, that time needs to be recorded each and every day.  Smart companies put this requirement into the employment agreement and have the employee sign it.

Second – Establish what activities constitute “direct vs. indirect” time. Direct time is generally spent working on a contract.  Indirect time is almost everything else. Further refine your indirect time into meaningful and consistent categories.  Common examples are: vacation, holiday, project management, recruiting, business development, HR, proposal writing and general business administration.

Third – Train your employees. Make sure that all of your employees understand what each category means and give them examples specific to your company’s activities.  Include this information in your on-boarding session on their first day of work. Revisit it periodically at company meetings.

Make it Easier

Invest in some smart tools. There are many choices for web-based time recording systems at an affordable cost. The best ones (and the wiser investment) already have the requirements for government contractors built right in. Most of these systems will also integrate with both your accounting system and perhaps even your third party payroll provider. This may save you quite a few late nights.

What You Can Achieve

Gain strategic insight into important operational information. For example:

  • What is your labor utilization? How much of the time is going to direct vs. indirect efforts? This is a key indicator of the health of your company.
  • How much billable time does the company have so far this month? If using a real time system, you might be able to better gauge your financial position.
  • How much time does it really take to put a proposal together? Make smarter bidding decisions based on time and effort.
  • Which contracts are most efficient or profitable? Determine which ones may be a drain on resources.
  • Which employees are helping you with business development or proposal efforts? Tracking this information will allow you to recognize their contributions to your success.
  • If you had to replace yourself, what would it really take?

For more information about developing effective timesheet procedures or other government contracting best practices, please contact Barbara Morgan of Aronson’s Outsourced Accounting Solutions practice at 301.231.6238



About Barbara Morgan

Barbara Morgan is Partner of the outsourcing practice of Aronson’s Government Contract Services Group. She has over 25 years of experience in both public and private accounting. Barbara is responsible for integrating new outsourcing clients and implementing their accounting software systems. Her combined expertise in generally accepted accounting principles, technical software capabilities, and the government contracting industry gives her a unique perspective and a level of knowledge that is unparalleled.

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