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July 18, 2014

Handling Government Cash Flow Correctly

One of the most important aspects of creating and managing a successful business is maintaining cash flow. This is especially essential for government contractors who operate in high growth environments. Properly managing cash flow and budgeting can help achieve goals for growth. It should be a priority for every government contractor business.

Contractors Not Getting Paid

According to an article from J.D. Harrison of the Washington Post, the General Services Administration has failed to fully pay 1,334 federal contractors, shorting them by more than $3 million since 2008, according to a House committee report. The agency did not fulfill a “guaranteed minimum payment” clause outlined in many of its contracts, the report said.

Timely Payments

One of the major factors that impacts a government contractor’s cash flow is receiving payment on time. Government entities usually have sufficient funds to pay their expenses. A contractor will get paid on time if they correctly submit an invoice. The challenge is following all of the governments rules and regulations for submitting invoices. They can have very detailed and specific requirements that must be followed. Some contracting companies have a position designated to make certain all rules and regulations involved with invoicing the government are followed.

Central Contractor Registration System

This is currently referred to as the System for Award Management. If a government contractor is not correctly registered with this system, they will struggle to receive payment. All invoices submitted to the government won’t be processed. Specific types of invoicing requirements must be met. A Dunn & Bradstreet Number as well as the contractor’s Taxpayer Identification number and more may need to be on the invoice. Many new government contractors have problems providing all the information requested on their invoices. They must follow the procedure for their invoices to be completed.

Online Invoicing

Today, most invoicing by government contractors is done online. Many utilize the Wide Area Workflow (WAWF) system. Those who use it realize this is a very detailed and challenging system for beginners. WAWF is known for not being easy to navigate. The information required must be entered correctly. Any small error during the data entry process could cause an invoice to be rejected, and payment to be delayed. Most government contractors hire people experienced with using this system. It will have a positive effect on the company’s cash flow.

If you would like to know more about how best to handle government cash flow, we can help. Please contact us with any and all questions pertaining to a government contractor’s cash flow.

July 11, 2014

Your Small Business Won’t Win Government Contracts Without These Essentials

Every small business owner knows that winning a government contract is an almost sure-fire way to make it onto the business fast track, but breaking into the government contract market is much harder for small businesses than it appears at first glance. In fact only 22.5% of government contracts go to small businesses. To squeeze your business into that undersized percentage, you have to come prepared to battle against much larger competitors. In order to do that, you need to make sure your small business has these ducks in a row:

Pay to Play: You Need To Spend More Than You Think

Small businesses that succeed in landing government contracts spend around $130,000 to prepare their company for going after these lucrative opportunities. These kinds of numbers can be hard to swallow for many small business owners, but for the brave few willing to make that kind of investment, that initial spending can be earned back many times over. These preparation costs are one of the main reasons the majority of government contracts go to large firms with deep pockets.

Adapt or Fail: You Need To Be Able To Sell What Governments Are Buying

If you want to break into government contracting and all the financial benefits that come along with it, then you need to use one of the biggest strengths available to small businesses: Adaptability. Your smaller size allows you much more flexibility to fine tune your offerings to exactly what a government contract is looking for. Being willing to majorly shake up your business to aggressively pursue a lucrative contract can make all the difference in the long run. You don’t have a lot of advantages over your larger competitors, but this is a major one. Use it as much as you can.

If you want more information on how your small business can prepare to win lucrative government contracts, then contact us today.

July 4, 2014

The World of Government Contractors

The size of the U.S. Federal government has grown dramatically in recent years. The increased size of government means services of the government contracting industry are in greater demand than ever before. There has been a slight decrease recently, but the services provided by government contractors remain in high demand.

Talent

One way for a government contractor to stand out from the competition is by having a highly skilled workforce. There will always be a need for workers with advanced educations, who can qualify for top-secret security clearances. The recruiting of such talent is a challenge. A contractor must compete with other contractors as well as the federal government. This is usually done by offering unique work experience opportunities. as well as competitive compensation packages and more.

Subcontracting

Unless required by a specific contract, a government contractor needs to explore all possible sales opportunities. Depending on the service they provide, a government contractor may also be able to work with governments on the state and local level. These smaller entities may not be able to provide the same level of income as the federal government, but they can be a very dependable source of revenue.

Network

When a government contractor has a good situation with one department of the government, they should ask what other department they should approach. One department may work in conjunction with several others. Discovering what departments of a government system can use a contractor’s services is essential. Developing positive relationships with as many procurement officers as possible is important.

Government Procurement Consultants

The procedure to submit a bid for a government contract can be overwhelming. The requirements to submit for a single contract can be a hundred pages or more. Making the mistake of not following just one of their rules, could easily disqualify a government contractor’s bid. Some companies use a government procurement consultants to help them successfully navigate the bidding process. In many cases, their consulting fees can cut into a thin profit margin. The knowledge and experience they provide can be learned for future contracts.

Accounting System

Some companies are surprised when they receive their first government contract. They realize it’s important to have a new accounting system. When a business tries to follow the accounting rules set forth for private business, they may feel it’s complicated. Accounting for a government contract is even more complex. A government contractor has to follow even more rules and regulations designed to prevent any type of scandal or corruption. This is why many government contractors employ the services of companies who have experience handling the government’s accounting requirements. They have the knowledge and experience to make compliance easy.

If you would like to know more about the benefits of being a government contractor we can help. Contact us today and learn more.

June 27, 2014

Small Business Lending: the Help and Hope You Need

There are all kinds of ways to get money to help the start up of your small business. One of the sure fire ways to get it going is through the use of small business lending. You could also go the route of getting people to support you, who aren’t looking for any return, but those people are few and far between.

Even if you are able to find some of these people to support you, you are still likely going to need a loan to get you through until your business is up and running. All the things that you’ve learned about running a business in school, or during everyday life, are now going to be put to the test.

For instance, how much is a good amount to ask for when applying for a loan? What will you need to cover? You will need to take out enough money to cover the utilities for the amount of months it will take you to start earning the money to pay off the loan. You will have to have a written plan with which you take into account how much it will cost to run your business on a daily basis altogether. And every time you earn money, you must write down the amount, and how much will go to pay off your loan and how much will be used for other necessities.

Since your loan is given to you for a certain amount of time, it’s best to start paying it back as soon as possible, so that you can come to to point of owing nothing as soon as possible. That is when you will begin to make a profit. That is when your business has become a success.

All because someone made it possible for you to have the money to pursue your dream. All because you had the dream. All because there was a kind of courage instilled in you by God, to make the choice to let nothing stop you from dreaming big. That is why you are a success.

For more information, please feel free to contact us. Thank you!

June 20, 2014

Investing in Start-ups: VCs vs. Venture Capitalists

Start-ups are considered to be a very risky investment. A widely quoted statistic states that 9 out of 10 start-ups fail. This means that in order to invest in start-ups. In general, there are two classes of investors that invest in start ups. These are angel investors and venture capitalists. Angel investors tend to provide the seed to get ventures started. While venture capitalists on the other hand tend to give larger sums of money over multiple periods.  The rounds of funding are delinted in the sequence: series A, B, C etc. A is the first round of funding, B is second round of funding etc.

Angel investors tend to take a less active role. VCs on the hand tend to take a more active role, and will often take seats on the board. Two of the  other key differences are that VCs have both more capital and longer time horizons. Angels on the other hand tend to have less capital and shorter time horizons. Angels tend to provide seed money to get the business off the ground, but usually do not have the necessary capital to fund the business to fruition.  VCs tend to have more capital and can fund the startup through various stages. Hence series A, B, C etc.

On thing that VCs and Angels have in common is that they both deal in extremely risky investments. Because of this both need to have highly diversified portfolios.

Of course ordinary investors can alleviate this problem buy into Exchange Traded Fund that tracks a venture capital fund.

If you have an questions you can contact us or visit our website at: our website.

If you would like to know more about either venture capital of Angel investing see: Tech Crunch

Or check out this article in the Wall Street Journal

June 13, 2014

Tips for Increasing Your Credit Score

Your credit score is so important, though many people do not think about it at all. If you ever want to get credit cards, purchase a house, or need a business loan, it is important to have a good credit score. With the economy, many people are relying on credit and their scores are decreasing. However, there are ways to increase your credit score.

Know your credit score. You need to know how good or bad it is, so you know what you are up against.

Pay your bills on time. If you need to, set up automatic payments so that you are never late on your payments. If you are late, get up to date and stay there.

Keep credit card balances low. Pay off as much as you can each month. Always try to pay more than the minimum amount. Do not move money from one credit card to another.

Do not apply for credit just to have it. Applying for credit too often can hurt your score. Instead, only keep a handful of credit cards on hand.

Use credit cards responsibly. Do not get credit cards just to buy everything that you want. When you use them, plan to pay them off quickly. Keep them open so that you can use them in emergency situations.

Find ways to cut back. If you find that you use your credit cards often, find ways to cut back. A little can go a long way. Stop going out to eat as much. Stay home instead of going out. A few dollars here and there will help you pay off some of your debt.

Handling your credit is very important. Someday, you might be interested in some large purchases so it is important to have good credit. Knowing your score is very important. Be sure to pay your bills on time and use your credit cards responsibility. Find ways to cut back on expenses so that you can get your debt under control.  Contact us.  We can help!

June 6, 2014

Handle PO Finance like a pro

Any time cashflow is restricted or you have little access to working capital, you may consider various types of loans. In the event that your credit cannot be extended, there is the tempting alternative of Purchase Order Financing or PO Finance. No one wants to look like a “newbie,” so here are a few tips on who you can handle PO Finance like a pro. This back-to-basics overview will give you a few ideas of what it is and how to use it.

PO Finance basics

PO Financing is a short-term finance option that provides capital for you to pay suppliers upfront so your company doesn’t have to deplete cash reserves. When you use PO Finance, the suppliers are paid directly, often times with a letter of credit. Your suppliers then fulfill the orders; with their proceeds arriving after shipment is received.

How to use PO Finance

Although generally used by new and growing businesses, PO Financing is a funding option available to any company with cashflow restrictions where the credit note cannot be increased, including those with government contracts. It is an attractive option when the only thing holding your business back is a small amount of credit to pay the suppliers. Despite of that, there are three simple things to keep in mind so you can use PO Finance with confidence.

  • Know your needs inside and out. As with any loan, you’ll need to have a very clear idea on what you need, why, and how long until you are able to pay it back. A PO Finance option is not any different in that regard, but there is a further consideration: be able to make more than you need to pay back the loan so you can start a more positive cashflow for your company right away. The only way to do this is to know how much you need to get your supplies, versus how much you are able to sell right away.
  • Make a decision about the free on board (FOB) right away. It’s a crucial determinant in deciding the risk factor of the PO Finance. For example, if destination point of a finished product is an American base within America, the risk factor is reduced significantly. However, if the destination point for parts to assemble a finished product is over seas, the risk factor is increased significantly. Clearly, it is within your best interest to keep risk factors low for the maximum amount of loan security.
  • Understand how the factor works. PO Financing almost always needs a factor on the back end to take them out. However, factoring can stand alone as its own form of financing since a factor legally purchases the invoice and advances a percent of the face amount to the company. With the U.S. Government as customer, it is usually “up to” 90%. For example, when the US Army receives an order, they pay within 30 to the factor. The factor, then, reduces the outstanding on that specific invoice, deducts its fees and remits the balance to the company.

    While a company may factor some or all its contracts and invoices under the specific contract, agreements with a factor may or may not have monthly minimums and length of agreement. On top of this variability, the fees and charges vary greatly and can vary anywhere from a singles digit annual rate to 30+% annually. Factoring is more expensive than bank lending and PO financing is even more expensive because of the completion risk factors and the financier taking the financial risk.

Having a PO financing option can do a great deal for your company. And, while it’s a great option for many areas from finance to real estate to manufacturing to retail, it may not be for everyone. The key is to know the risks involved, as well as how to minimize those risks. Want to know if PO Finance is right for you? To talk more about this, or anything else, please contact us. Thanks.

May 30, 2014

Government Contracting For Small Businesses: The Need for Expertise in Navigating the Maze of Rules and Regulations

As many of us learned in our first Civics class, the government is laid out into three discrete branches.  The legislative branch makes the laws, the executive branch enforces the laws, and the judicial branch interprets the laws.  It is elegant in its simplicity.

But in reality, small businesses involved in government contracting are subject to a much more complex regulatory regime.  This is because businesses must conform to state and federal laws, agency regulations, and executive orders.  Furthermore, there are dozens agencies, issuing hundreds of regulations and orders to businesses each year.  Indeed, in 2013 alone, 26,417 new rules were published in the Federal Register.  Each source of law and regulation is ever-changing, which makes government contracting for small businesses a particularly challenging field to navigate.  Knowledge and experience of the process, from initial bidding to payroll and billing, is necessary in order to be successful.

A recent set of proposed regulations is particularly illustrative of how challenging compliance can be.  In 2011, the Department of Labor, Office of Federal Contract Compliance Programs, proposed a new regulation that would require that 7% of a government contractor’s workforce qualify as disabled.  In addition, the regulation would require contractors to take specific actions in the areas of training, record-keeping, and recruitment.  Businesses that seek to conform their procedures with the new rules must keep in mind that the Americans with Disabilities Act prohibits employers from questioning applicants about their disability status, in order to prevent discrimination.  Thus, in order to navigate the contracting process successfully, a business would need to recognize how these laws and regulations interact.  This patchwork of rules and regulations also exists in the initial phases of seeking government contracts.

Despite the apparent complexity, there is no doubt that government contracting can be a rewarding field.  And luckily, a number of different agencies of the federal government publish guidance for new contractors.  Here is a 2009 version (PDF) of the Department of Labor’s guidance for new contractors.  Still, there is no substitute for a firm that has both the experience and knowledge of the contracting process.  If you are interested in learning more about our expertise in government contracting, feel free to contact us.

May 23, 2014

How long does Payroll Funding take for Government Contractors?

The length of time that payroll funding takes for government contractors varies depending upon several factors. Generally, the average length of time for funding is 30-45 days following the submission of your first invoice.

Invoices must be submitted on the 1st of the month. Your first invoice is not submittable until you’ve had 2 payrolls and in most cases, payroll is made on the 15th and the 30th of the month.

You should be aware that there are exceptions to the length of time it takes for payroll. Things can happen that may hold-up the payment process. Rarely, it can take anywhere from 90-180 days from the submission of your first invoice, depending upon the cause for the hold-up.

Be prepared to wait it out in the beginning. You may find that you have to wait a full 5 payrolls before finally getting paid. When contracting for the government, you want to fully understand what you’re getting into and you want to ensure that you have the right lender to fund your contracting project(s).

Choosing the wrong lender could lead to untimely problems for both you and the lender, because lenders who are not familiar with government policies regarding this type of funding typically end up a thing of the past.

Exceptions that Could Cause Slow Payment

These are a few problems that could arise causing slow payroll funding for government contractors:

  • A Contractor Not Invoicing Correctly
  • A Lost Invoice
  • Misdirected Payment
  • Payment Office Relocation
  • Depleted Funding
  • Redirected Funding

The most prevalent reason for slow payment is the failure on the part of the contractor to submit their invoice correctly according to the contract. When taking all of these slow payment factors into consideration, it’s important to know that these problems very rarely affect commercial contractors.

Lender Problems when Slow Payment Occurs

Choosing a lender that is not experienced in dealing with the federal government could lead to financial distress for both you and the lender. This is because the lender expects to receive payment in an allocated amount of time.

If payment is held up due to an invoice issue or any of the other reasons listed above, the lender suffers a financial lossand it could also affect future funding for the contractor by the lender. This then has a domino effect and could harm the contractor’s relationship with the government client if the money is not there to complete a project.

Choosing an Appropriate Lender

When you need to select a lender to fund a government contracting project, you want to make sure to select a lender that is familiar with government payroll funding. This is not a cut-and-dry process. There is a lot of paperwork involved and government regulation to take into consideration.

During the lender selection process, you need assistance. Seeking out the assistance of an expert who can help you connect with an appropriate lender will eliminate future problems and ensure that all of the required paperwork is in order for timely payment.

To learn more information regarding payroll funding for government contractors, contact us today. Financial Engineering Counselors, LTD. is proud to provide financial resources to government contractors and has over 30 years of experience with financial leadership and business.

May 16, 2014

Asset Based Lending and Cash Flow Lending, What’s the Difference?

Owning and operating a small business means that you need capital. One of the typical and more traditional ways to get money is to borrow based on your small businesses cash flow, or what the bank calls cash flow lending. Banks often favor these loans because the amounts are based on actual, tangible dollars.

A different method to obtain working capital is through a collateralized loan; accounts receivable, inventory, and equipment. These types of loans are based on alternatives other than the company’s cash flow, credit history and profitability, which banks typically do not favor.

Pros and Cons of traditional or Cash Flow Loans

Pros:

- Operate in a much more regulated environment

- Great choice for a business who is already established, has a healthy cash flow, strong balance sheet, and good credit

- Costs are usually lower

Cons:

- Conservative loan style makes them harder to get for some Lending limit

- Poor availability to businesses with bad credit or low cash flow

- Not flexible; difficult to work with through problems

- Financial compliance must be maintained

Pros and Cons of Asset-Based Loans

Pros:

- Loan agreements are based more on collateralized assets and not solely at financial standing and credit rating of business

- Gives small business more opportunities to take advantage of raising credit limit

- A positive, reliable source of money

- Because funds are routed from reliable source, gives peace of mind to focus on running business

- Greater advantage for a SDVOSB to work through troubling situations

- Grows as business grows

Cons:

- Sometimes higher costs associated with obtaining initial loan

- Requires assets to apply

As you can see, advantages and disadvantages exists for each type of loan. While greater ease of access is a big draw for asset-based loans (especially for those with little cash flow), applicants should be aware that these types of loans come with a higher price tag and associated fees. But a healthy peace of mind can sometimes outweigh those costs. In the end, the loan you choose should fit the situation you are in.

For more information on how we can help you, please contact us any time.

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