How Government Contractors can Improve Cash Flow and Get Paid Faster

Posted by Deltek on August 4, 2017

How Government Contractors can Improve Cash Flow and Get Paid Faster

By its nature government contracting is an industry that requires a significant amount of partnerships and teaming among companies. Many prime contractors dealing with government agencies rely on subcontractors as part of their strategy to bid and win contracts. Partnering with and managing these subcontractors effectively is vital to successful contract completion and the delivery of profitable projects.

Even though subcontractors may not deal directly with the government, they are still subject to government laws, policies and regulations. As the prime contractor, it is your responsibility to ensure that your subcontractors are in compliance and completing obligations as stated in the contract. The work of your subcontractors must be closely managed, since uncertainty and problems at the subcontractor level can significantly impact the overall success and profitability of the project.

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Even before the contract is won you need to determine how you will staff it should you win. Projects, especially multi-year projects, often require modifications that involve many change orders and require close collaboration between the prime and subcontractors.

Today this process is fairly disconnected since primes and subcontractors are usually working in separate systems. If this is the case for you, it means that you are manually passing information like timesheets, expense reports and invoices back and forth outside of your actual project billing, or cost accounting system. Manual processes can be not only expensive, but also error prone since they often involve double data entry and time consuming reconciliation. Every time a question arises about an individual line item it slows down your entire process, meaning both parties don’t get paid on time.

Enter: Subcontractor Management – a procurement solution that can revolutionize your project delivery!!

Key Ways Subcontractor Management Can Help You

  1. Financial Management

    Let’s start with the financial aspect of your projects. If your finance team is having to delay invoices to your end customers, because you’re busy reconciling subcontractor transactions, it will delay payment back to you and your subcontractors, and disrupt your cash flow. Billing cycles will be longer due to the added time it takes to resolve disputes and make corrections. Plus manual processes will make it more difficult for your finance team to recognize revenue.

    The best way to handle this is to have the information in one system so that it is a smoother, more integrated and automated process. That way you can submit the bill to your end customer and recognize revenue immediately.

  2. Project Management

    When your subcontractor time system is not integrated into your time entry system, your project managers won’t be working with a clear, real-time view of the actual status of their projects. This will impact their ability to effectively manage budget, schedules and project performance. Plus if your procurement system doesn’t enable your project managers to quickly determine the types of skills or security clearances subcontractors must have, it will be a problem. Hiring subcontractors without knowing the full set of requirements or having to correct mistakes after the fact will be expensive and time consuming for your project managers.

    Wouldn’t it be better if subcontractors had a way to securely access your time entry system to enter time from their mobile devices? The system should also enable your project staff to automatically validate time entry records against rules they’ve set up, and to alert them to discrepancies and subcontractor errors.

  3. Procurement Management

    Many subcontractor procurement processes are slow and inefficient; there are a lot of people managing a lot of paper, pushing information back and forth.

    Wouldn’t it be more efficient to have a procurement system that you could send over to your subcontractor, with the full statement of work embedded? That way everyone understands the entire scope of the project and knows who’s doing what at the onset of the project. Transparency will drive accountability, and help to streamline the delivery, modifications and closing of your projects.

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Summary

Most of the problems encountered in the prime – subcontractor relationship occur because both parties are not using the same solution to track project performance and enter time. It also results in a lack of real-time information that makes it difficult for project managers to quickly acquire the right subcontractors, support audits, incorporate change orders, and resolve disputes quickly. Moving to a system that automates and streamlines subcontractor management will enable you to get paid faster, increase your cash flow, improve relationships with your subcontractors and increase the profitability of your projects.

Next Steps

Learn how you can revolutionize the way you manage subcontractors to maximize profits, improve cash flow and deliver higher quality projects.