Setting up Business Central for government contractors

How Business Central for government contractors collects cost

Each contract, task order or delivery order is set up as a project. Project tasks mirror the contract line items, or the work breakdown you report against. Labor, materials, subcontractor invoices and travel all post to a task. So cost by contract line is a standard inquiry.

Planning lines hold the funded value and the budget for each line. So a program manager can compare spend with funding before a ceiling is reached. The project also records the contract type. Fixed price, time and materials and cost-plus work are billed and recognized in different ways.

Daily time sheets with approval and a change history

Labor is usually the largest cost, and auditors look at it hardest. Each person enters a time sheet against project tasks and indirect codes. Examples are leave, training and bid work. A supervisor then approves it before anything posts.

Standard time sheets cover total time accounting, when every employee records all working time. They lack a reason prompt on each correction and a daily reminder. So we add those with a small extension. Or we pick a timekeeping app that already has them.

Fringe, overhead and general and administrative pools in Business Central for government contractors

We lay out the chart of accounts so direct costs, each indirect pool and unallowable costs sit in separate account ranges. Dimensions add the contract and department. With that in place, a financial report can total each pool and its base for any period. Nobody sorts by hand.

Working out provisional rates and applying them to contracts is where the standard product stops. The cost accounting module can allocate pools across cost objects, and some contractors use that. Others prefer an add-on. It computes rates, burdens project cost and tracks the variance against billing rates.

Keeping unallowable costs out of billings

Entertainment, some travel excess, donations and similar spend must be found and kept out of what the government pays. We give unallowable costs their own accounts. We also set them as defaults on the vendors and expense types where they usually arise. So the coding is right at entry, not fixed later.

Purchase approval workflows add a second look for invoices coded to sensitive accounts. When one invoice is partly allowable, you split the lines across accounts at entry. The result is a ledger where the unallowable total is one number on a report. Posted documents support it. Government contractors can show an auditor that trail straight from Business Central.

Billing limits of Business Central for government contractors

Fixed price milestones and time and materials lines bill straight from planning lines. Cost-plus invoices show direct cost, applied indirect rates and fee by line. They need a custom report layout or a contractor add-on, because the standard sales invoice has no idea of burdened cost.

The same goes for incurred cost schedules and government-format vouchers. None of this makes Business Central a poor choice, since the ledger, projects and controls are strong. But it means the right add-on or a scoped extension belongs in the plan from day one.

Business Central for government contractors: buyer questions

Does Business Central meet DCAA audit rules?

No software meets them alone, because an audit looks at your whole accounting system, including policies and practice. Business Central can be set up to meet many of the criteria. Cost by contract and separate unallowables are two examples. Add-ons close the gaps in indirect rates and timekeeping. We map each criterion to a feature or a gap before you decide.

Can it calculate indirect rates?

It can report each pool and base, so the rate is a simple division. The cost accounting module can also allocate pool cost. Automatic burdening of project cost with provisional and final rates is not standard. So contractors with cost-type work normally add a product for that. We help you choose one that fits your contract mix.

How does it compare with Deltek?

Deltek products are built for government contracting and include rate and audit features as standard. Business Central is a general business system with stronger ties to Microsoft 365 and Power BI. Which fits better depends on your contract mix. Our comparison page covers it, and we can talk through the trade-offs for your own firm.

We hold mostly fixed price contracts. Do we still need an add-on?

Often not. With fixed price and commercial-item work, the audit burden is lighter. Standard projects, time sheets and a well designed chart of accounts may be enough. We would still set up pools and unallowables properly. So you are ready for cost-type work later, and you do not need to rebuild your ledger when that day comes.

Can small contractors start on Essentials?

Yes. Projects, time sheets, resources, purchasing, cost accounting and financial reporting are all in the Essentials license. Staff who only enter time and approve documents can often use Team Members licenses. So the cost stays modest while the team is small. We confirm the mix against Microsoft's current licensing guide before you order.

Related reading for Business Central for government contractors

Costing by contract, time capture and indirect allocation each have their own page. There is also a side-by-side look at the product many contractors weigh against Business Central. Start with the area that your auditors ask about most. Then ask us how Business Central for government contractors can fit your contracts. For the product detail, see Microsoft's guide to working with dimensions.