How Factor AE Helps Firms Work Toward FAR Compliance
February 4, 2020
"Factor AE gives firms doing government work the tools they need to be FAR-compliant. When used properly, the system can minimize the risk of putting costs in the wrong accounts or the wrong format."
Factor AE and Guidance Toward FAR Compliance
Factor AE gives firms doing government work the tools they need to be FAR-compliant. When used properly, the system can minimize the risk of putting costs in the wrong accounts or the wrong format. This makes it easier to show auditors that the company is complying with government regulations and eliminates the fear of penalties.
The system does this in two ways:
● It guides the consistent allocation of labor as direct or indirect. While government regulations don’t specify how this must be done, the key is doing it the same way every time to allow auditors to understand your process. So, in Factor AE, if work is done on a project it is direct; if not, it is indirect and you will be cautioned not to enter it as direct. This best practice minimizes the risk of problems that can arise when using a system that allows a more free-form approach.
● It helps keep you from entering non-allowable overhead expenses. The government has a long list of things that are not billable. For example, general marketing expenses for items like maintaining your website, attending tradeshows, etc. are not billable. The reasoning is that because the government is very clear about what jobs are available, expenses not related to a specific job may not be billed. Factor AE has separate categories for different types of expenses (in this example, for general marketing and project-specific or “pursuit” marketing), which is essential since the primary focus of audits tends to be overhead.
We have found that if the system doesn’t provide beneficial boundaries, it’s very easy for firms to make mistakes they didn’t even know they were making. These built-in boundaries and general ledger accounts also help firms by encouraging them to make certain decisions about their processes and then train their staff about how Factor AE operates and why it works the way it does.
The end result of having FAR-compliant processes and software that enables easier adherence to the regulations is often significant savings due to avoiding refunds and penalties and to the elimination of time spent scrambling to understand and meet the requirements.
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