Top 10 Accounting Mistakes Government Contractors Make—and How to Avoid Them
Government contracting opens the door to major opportunities—but it also comes with strict financial rules. Failing to follow DCAA compliance standards can jeopardize your contract or trigger costly audits. Here are 10 common accounting mistakes government contractors make—and how to avoid them.
- Inadequate Timekeeping: Manual or inconsistent time tracking is a major red flag. Use a DCAA-compliant system with daily entries and supervisor approvals.
- Mixing Costs: Don’t combine direct and indirect costs. Segregate them clearly in your chart of accounts.
- Unallowable Costs: Charging entertainment, fines, or lobbying expenses to a contract can result in paybacks. Know what’s unallowable under FAR.
- Lack of Written Policies: Contractors often lack documented procedures. DCAA auditors expect clear internal controls.
- Improper Cost Allocation: Misallocating overhead or fringe costs can throw your entire budget out of compliance.
- Weak Job Costing: You must be able to track costs by contract, in real time.
- Inaccurate Billing: Invoicing mistakes can delay payments and damage your credibility.
- Outdated Accounting Software: Use software built for government contract requirements.
- Late Incurred Cost Submissions: These are due annually—miss the deadline and you risk audit findings.
- DIY Approach: DCAA compliance is complex—don’t go it alone.
At N5 Specialized Accounting Services & Support, we help contractors stay compliant and audit-ready.
