There's money to be made when your company is hired by the government, but they have different ways of doing business. For instance, there are a lot more rules you are legally required to follow, sometimes regarding seemingly small things like recordkeeping.
Expense reports, contracts, tax forms, employee records--recordkeeping is important in any business. For government contractors, it is especially vital. You will be held to an even higher level of accountability and oversight than before.
If your company already has an excellent recordkeeping system in place, this will be no problem. However, there are many recordkeeping rules for government contractors and subcontractors that you will need to be aware of and prepared to follow for audit and inspection purposes.
What records should we keep?
The government is expected to have high standards in its business dealings, and your detailed recordkeeping can help ensure everything is above board and done efficiently. Keeping accurate records is part of this.
You probably have a pretty good idea of what business documents are important based on your usual recordkeeping; however, here are some specific examples to get you thinking:
- Equipment records
- Property records
- Payroll sheets
- Tax withholding statements
- Purchase orders
- Inspection and quality control production records
There are too many possible work documents to list here, but the general rule is to keep everything for the established record retention period (more on that below). Even if you’re just a subcontractor, you never know when you will need to pull out proof of something or review an important project detail.
Record retention rules
For employees responsible for maintaining records concerning work as a government contractor or subcontractor, the go-to guide is the Federal Acquisition Regulation (FAR) handbook, specifically subpart 4.7. These policies specifically offer guidance in the retention of your records.
A few specific rules for recordkeeping instruct government contractors to:
- Retain all records, including “books, documents, accounting procedures and practices, and other data, regardless of type and regardless of whether such items are in written form, in the form of computer data, or in any other form…”
- Keep these records for at least three years after final payment unless otherwise specified.
- Be aware of any clauses in your contract that require a longer record retention period.
- Know that specific documents within financial and cost accounting records, pay administration records, and acquisition and supply records are subject to a longer retention period.
- Note that some records may only need to be retained for two years.
Keeping records for the required period of time will ensure you have everything available in case an issue arises later or you get a surprise audit.
The right system makes recordkeeping easy
Today, using digital records is the best way to make recordkeeping convenient for government contractors. Digital records are easily searchable and don’t require whole rooms of filing cabinets. It’s easy to make and send digital copies of important documents to government liaisons when required, and files can be stored online so they are not lost due to human error or an act of nature.
However, it’s important to note that there are government contractor rules associated with electronic records. These state that:
- The e-file must maintain the contractor’s complete records, which means paper records must be scanned or otherwise converted and saved in their entirety.
- The contractor must establish procedures for effectively converting and preserving entire paper documents so nothing is missing.
- The contractor must create an efficient indexing system for convenient access to files.
- Paper files must be retained for at least one year after being converted digitally.
While adopting and utilizing a computerized recordkeeping system takes some work upfront and brings with it additional government rules you must follow, in the end, the system will make recordkeeping easier and more streamlined. That, in turn, will help you focus more on government compliance for future contract work and make you a reliable contractor in the government’s eyes.
If you want to continue receiving lucrative government contracts, great recordkeeping is vital. Make sure your company knows the rules associated with government contract recordkeeping from the start and uses an efficient recordkeeping system to ensure nothing gets lost. This will prove the high quality of your work and safeguard the company from any non-compliance issues.