In this podcast episode, we talk about when shoud small businesses need to start doing cost accounting. Small businesses engaged with the federal government, either as a subcontractor or a prime, should understand how to do cost accounting or have someone do it for them so they can have a good conversation with contracting officers and others about their real costs. They should also have a good estimating system as this is how they price. Cost accounting and estimating systems should mirror each other, and that the SF 1408 is the compliance checklist for cost accounting system.

The way a company estimates its price for the federal government and does its cost proposals should mirror how its cost accounting system is set up. The indirect pools and the way indirect rates are applied should also mirror the exact same way the proposal was made to the federal government. If a company engages in a lot of subcontract activity where the general and administrative (G&A) cost is a lot more than what the government is willing to pay, it might need to tack on a sub material and handling cost. This changes the company's cost goals and how they account for costs. If you want to learn more about managing your cost accounting, this episode is for you.