Overview
Vibronyx, a disadvantaged veteran-owned small business, received its first Department of Defense (DoD) contract award as a Prime Contractor. To secure this award and initiate contract delivery, Vibronyx needed to meet the Department of Defense’s accounting standards.
Specifically, the Defense Contract Management Agency (DCMA) required a Pre-Award Accounting System Design audit to confirm the company’s compliance with the necessary accounting system criteria. Vibronyx lacked a compliant accounting system, and in response, engaged BackOfficeVets (BOV) to implement a DCAA-compliant system, manage the audit process and provide ongoing Fractional CFO services. The goal was to ensure that the company’s accounting system would pass the DCMA audit, enabling it to begin contract operations.
Through this partnership, Vibronyx swiftly achieved compliance, passing the DCMA audit and launching contract operations with 56% savings on financial management—equating to $120,000 annually.
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Challenges
Vibronyx faced several obstacles as a new company aiming to establish its accounting and operational processes as a government contractor:
- Lack of a Compliant Accounting System
- Vibronyx did not have an accounting system that met the Defense Contract Audit Agency (DCAA) standards, essential for managing DoD contracts, or other systems for financial transaction processing and reporting.
- Unfamiliarity with Compliance Standards
- As a small business unfamiliar with the specific regulatory requirements—such as Cost Accounting Standards (CAS), DCAA requirements, ICE submission, and the Federal Acquisition Regulation (FAR)—Vibronyx needed expert guidance to align its operations with these requirements.
- Absence of Policies and Procedures
- For compliance with the audit, Vibronyx lacked formalized policies and procedures required for both daily and periodic accounting functions.
Solutions
- System Implementation and Fractional CFO Support
- System Selection and QuickBooks Implementation: After reviewing several potential accounting solutions, BackOfficeVets chose to implement QuickBooks Online (QBO) as the most cost-effective and DCAA-compliant option for a small business in Vibronyx’s position. BOV set up QuickBooks with a tailored chart of accounts, cost allocation structures, and job-costing methodologies that aligned with government contracting standards. BOV also implemented and integrated a full suite of other tools to enable efficient operations including QuickBooks TSheets for time tracking, Bill.com to streamline payment processing, and Expensify for automated expense management.
- Fractional CFO Service with DCAA Compliance and ICE Submissions
- BackOfficeVets ensured that Vibronyx’s accounting system not only met the necessary DCMA audit criteria but also complied with DCAA regulations. BOV implemented proper accounting practices for direct and indirect cost pools, established DCAA-compliant invoicing procedures, provided monthly payables, payroll, cash flow analysis and financial reporting, and supported the setup of systems for accurate Incurred Cost Electronically (ICE) submissions. These steps were critical for the company to maintain operational efficiency and compliance throughout the lifecycle of its government contracts.
- Comprehensive Training and Knowledge Transfer
- To further support Vibronyx, BackOfficeVets conducted specialized webinars and training sessions for the management team, covering key principles of CAS, GAAP, FAR, and DCAA requirements. This empowered Vibronyx’s leadership with a solid understanding of compliance standards, and how to maintain ongoing audit readiness. Policy and Procedure Development: BackOfficeVets provided immediate access to a set of well-documented accounting policies and procedures based on industry best practices. These were then tailored to Vibronyx’s specific business model and contract types, ensuring that all daily, monthly, and yearly processes were aligned with government requirements.
Results
The collaborative efforts of Vibronyx and BackOfficeVets resulted in a seamless audit process
and the following measurable outcomes:
- Successful Pre-Award Audit
- BackOfficeVets implemented QuickBooks Online, configured the accounting system with a compliant chart of accounts, and ensured adherence to DCAA standards for job costing, indirect rates, and billing practices. As a result, Vibronyx passed its Pre-Award Accounting System Design audit without issues, meeting the criteria of FAR 53.209-1(f) and Standard Form 1408 (SF 1408), enabling the company to begin work on its first DoD Prime Contract.
- Ongoing DCAA Compliance
- With BackOfficeVets’ continued support, Vibronyx received ongoing assistance with DCAA-compliant invoicing, cost reporting, and timely ICE submissions. This support was vital for maintaining government compliance, accurate financial reporting and cash flow, helping Vibronyx manage its DoD contracts with confidence, while also allowing the company to focus on its core business of supply chain digital transformation.
- Successful Post-Award DCMA Audit
- Five years after the initial audit, BackOfficeVets once again helped Vibronyx successfully pass a follow-up audit by the DCMA. The continued effectiveness of the QuickBooks Online system and BOV’s tailored accounting policies ensured that Vibronyx remained compliant with DCAA requirements, positioning the company for sustained success in government contracting.
- Operational Efficiency and Savings
- By outsourcing system implementation and financial management to BOV, Vibronyx automated manual processes and achieved a 56% reduction in finance compliance and accounting costs, saving $120,000 annually compared to inhouse management. This allowed Vibronyx to direct resources toward growth and innovation while retaining a stable, compliant financial foundation.
