If Your New Company is Funded by a Government Grant, You’d Better Have a Strong Accounting Backbone
If you’re trying to secure government funding such as an SBIR (Small Business Innovation Research) or STTR (Small Business Technology Transfer) award — or if you’ve already been awarded the grant — you need a well-organized accounting system, especially if you’re applying for a Phase II SBIR/STTR grant.
In other words, you need an accounting system with a real backbone.
In a strong accounting system, the chart of accounts is a list of your financial history, including assets, liabilities, equity, revenue, and expenses. This gives management, shareholders, and investors a clear view of the company’s financial status at any given time. Well-organized accounts provide financial insights that enable management to make more informed decisions about cash flow, project costs, and staffing needs.
Because the chart of accounts is foundational for good accounting, it’s important to understand it and set it up correctly.
In fact, companies that receive government funds must have an accounting system that separates Direct costs, Indirect Costs (e.g., facilities and administrative), and Unallowable Costs (can’t be charged to the federal government or included in indirect costs), per Federal Acquisition Regulations.
Organizing your chart of accounts by these account types allows the company to produce reports that provide enough details to calculate the current indirect rate, understand the cost of taking on projects or new research and clearly see the costs of employees. This is powerful information for leading a strong successful organization. This is also information the government may request if you’re using SBIR or STTR funds to ensure proper stewardship.
BBCetc offers a full suite of post-award services to help organize and manage SBIR/STTR awards. Please contact grIP Senior Advisor Becky Aistrup at BBCetc for more information.