Smart Billing Practices for Federal Contractors

At a Glance

• Main Takeaway: Effective, efficient, and timely customer invoicing is a critical factor in maintaining consistent and adequate cash flow.  
• Business Impact: Correct billing the first time leaves your customer with the impression that they are dealing with a well-run business.
• Next Steps: Maximize the use of accounting software features to streamline the billing and invoicing process. Learn more about how Aprio’s Government Contracting professionals can help.

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The Full Story:

Effective billing practices are essential for federal contractors to ensure smooth cash flow and maintain strong client relationships. By implementing these best practices, contractors can streamline their billing process and present themselves as reliable and professional partners to their clients.

Create a Contract Brief

A contract brief is a concise summary of key contract elements designed to simplify billing and contract management. It should include prime and/or subcontract numbers, points of contact for both contractual matters and billing submission, due dates for bills and supplemental reports, contract type and period of performance, option years, contract and funded values, fee retention, plus any limitations on billing, key flow-down clauses, and any other pertinent data to make billing and contract management a smooth process.

It should be a living, accessible document that is continuously updated as contract modifications occur or other circumstances change.

Develop a Written Policy and Procedure

Accounting staff often have varying levels of experience, and good guidance can streamline the process and prevent mishaps. Written policies promote consistency, clarity, and accountability. This document should clearly define roles for each corporate area, including Program Managers (PM), Contracts Managers, Accounting personnel, and Executives. It should outline workflow steps and approval hierarchy.

For instance, the PM may be responsible for approving timesheets or other project expenditures and is most likely the one to know about or discern unusual activity that affects the bill. The Contracts Manager should communicate relevant funding modifications to the accounting team. The document should note who needs to sign or provide final approval before an invoice is transmitted to the customer.

The written policy document should also include specific procedures for different contract types. Below are a few examples:

• A fixed price contract may require notice notifying the accounting team that the project or milestone is completed. 
• Time and Materials and Cost Reimbursable contracts should be well scrutinized to prevent the inclusion of unallowable costs, ensure labor and indirect rates are current and correct, and that timesheets and payables data in the accounting system support the billed amounts. Cumulative amounts should be checked against funded values to prevent overbilling.

The written policy should also address how overpayments are handled, how staff are trained, and include a provision for periodic self-audit. 

Best Practices for Success

1. Meet your deadlines. 

Getting invoices out on time has many benefits. The company gets paid when expected, who in turn can pay subcontractors and other vendors on time. Government customers are also appreciative of invoices that are correct and on time, leaving a positive impression with a simple action.

Create a billing calendar with firm due dates which allow adequate time for timesheet approval and internal review. Flow these due dates down to subcontractor agreements. 

2. Master government billing systems.

Wide Area Work Flow (WAWF) and similar systems are complex and often unforgiving. In WAWF, minor errors (e.g., CLIN mismatches) can cause invoice rejections and delayed payments.

For all invoices, the Government has 7 days to accept or reject your invoice. Your payment clock only begins upon acceptance of a valid invoice. Consider some training or an outside consultant to smooth out problems proactively.

3. Strictly adhere to the contract billing format. 

Agencies, prime contractors, and individual contracts can each require a unique invoice format. Prepare it exactly as they want to see it done. Include cumulative billed and funded amounts and attach any required supporting documents, such as written project progress reports, timesheets, and/or travel receipts.

It’s worth noting that NIH and some other agencies require using Form 1034, which is a summary sheet that must accompany your invoice. Be sure to follow the specific template and instructions provided.

4. Check your math, check your data.  

As basic as it sounds, you must make sure that your rounding is correct. If you are preparing time and materials invoices in an Excel worksheet, it is common that each line item will round correctly, but the overall total at the bottom is off by a penny or two. Don’t assume your customer will ignore this as they have the prerogative to reject the entire invoice. 

Ensure your billed amount aligns with the current funded ceiling. Clearly show any required withholding of profit and the corresponding percentage.

5. Train reviewers and approvers. 

Mistakes happen. Time gets entered on the wrong day of the week and unallowable items accidentally creep into expense reports. 

Educate your internal team to catch common errors like mischarged time or unallowable costs. Don’t let the $5 in-room movie purchase on the hotel bill undermine the acceptance of a large invoice.

Leveraging Your Accounting System to the Fullest

Robust ERP systems have many options to help you streamline billing, manage projects, and mitigate risk.

Here are a couple of ways you can maximize your software:

• Set up option years, tasks, and subtasks (CLINs) to manage billing and reporting.
• Populate fields for contract and funding value, periods of performance, and billing rates. Attach supporting modifications or documents within the system.
• Change source documents. Avoid manually changing invoices without also correcting the underlying timesheet or expense item. Failure to do so typically comes back to haunt you in an audit. 
• Use a logical and consistent method of naming contracts to reduce coding errors.
• Allow subcontractors to use your timekeeping system for easier billing coordination. The timesheet can become their vendor invoice, helping you easily meet your billing deadlines. 
• Post cash receipts at least weekly and share an accounts receivable aging reports with leadership. Follow up immediately on any discrepancies. 

The Bottom Line

By implementing smart billing practices, you improve cash flow, reduce audit risk, and strengthen client trust — key drivers of long-term success in federal contracting. 

Need help identifying bottlenecks and opportunities for streamlining? Not sure where to begin? Reach out to our highly experienced GovCon outsourcing team to help you on your path to success.

Related Resources:

• Merger & Acquisitions for Federal Contractors: Unallowable Costs
• Scaling Smart: Optimizing GovCon ERP Systems to Manage Multiple Legal Entities
• Revenue Recognition for Government Contractors: The Basics