By Dave Petet
Government contracting plays by its own financial rulebook. What you’re allowed to charge, how you track your people’s time, and how you set your rates can all be reviewed after the fact. Growing in this world takes more than good books. It takes books that hold up to scrutiny.
If you’re a government contractor looking at fractional CFO services for the first time, it helps to know what’s different about your industry, and what to look for in a CFO.
What Makes Government Contractor Finance Different
- Contract type drives everything. How you’re paid determines how you manage margin and risk (see the table below).
- Cost rules. Under FAR Part 31, costs on many government contracts need to be allowable, allocable, and reasonable. Not every real business expense can be billed, and unallowable costs have to be kept separate.
- Indirect rates. Fringe, overhead, and G&A costs get spread across contracts through rates. On cost-type work, you typically bill during the year at provisional billing rates, then true up to actual costs later.
- Timekeeping and accounting systems. Labor typically has to be tracked by contract. Your accounting system has to separate and support costs, sometimes before you’re even awarded the work.
- Audits and annual filings. Cost-type contractors generally file an incurred cost submission after each fiscal year. DCAA (for Defense work) or another agency may audit it, sometimes years later.
- Registration and supplier status. You need an active SAM registration, renewed annually, to win federal work. If you sell to prime contractors, getting and staying on their Approved Supplier List can bring its own financial and quality requirements.
- Billing and cash flow. Invoicing and payment follow government processes, and timing can strain cash, especially as you take on more work.
- Growth and eligibility. SBA size standards decide whether you qualify for small business set-asides. They’re set by industry code and based on revenue or headcount, so growth can change your status.
Specific requirements vary by contract, agency, and size, and your contract terms govern, so this is a general overview, not legal or compliance advice.
Contract Types at a Glance
| Contract Type | How You Get Paid | Why It Matters to Finance |
| Firm-fixed-price | A set price, no matter what the work costs you | Margin depends on how well you estimate and control costs |
| Cost-type (cost-plus) | Reimbursement of allowable costs, plus a fee | Your accounting system and indirect rates have to hold up to DCAA or agency review |
| Time-and-materials / labor-hour | Set hourly rates times hours worked, plus materials | Timekeeping and billing-rate accuracy drive both revenue and compliance |
What Is a Fractional CFO?
A fractional CFO is an experienced finance executive who works with your business part-time, as an ongoing relationship rather than a one-time project. You get the strategic financial leadership of a full-time CFO without the cost of a full-time salary, bonus, benefits, and equity.
What a Government Contracting Fractional CFO Actually Does
- Builds and monitors your indirect rates, from provisional billing rates through year-end true-up
- Makes sure your accounting system and timekeeping can support what you charge
- Prices and bids with real cost data, so you’re not guessing on fixed-price work
- Tracks profitability by contract, so you know which work is actually making money
- Plans cash flow around government billing and payment timing
- Prepares incurred cost submissions and gets you ready for DCAA audits long before they come up
- Keeps your SAM registration, size status, and supplier qualifications from turning into surprises
- Advises on growth decisions, like adding contract vehicles, hiring, or outgrowing small business status
How to Evaluate Government Contracting Fit
Not every fractional CFO has worked in this world. A few questions worth asking before you hire one:
- Have they actually built and managed indirect rates for a government contractor, or would they be learning on your time?
- Do they know FAR Part 31 well enough to tell you what you can and can’t bill?
- Are they comfortable with cost-type contracts, not just fixed-price work?
- Have they helped a company through a DCAA audit, an incurred cost submission, or an accounting system review?
- Can they work with your contract managers, auditors, and contracting officers without you translating?
If most of the answers are no, you may end up teaching your CFO the industry instead of the other way around, which defeats a lot of the point.
Getting Started
A government contracting fractional CFO should speak your language from day one: indirect rates, allowable costs, cost-type and fixed-price work. At Crown CFO, our fractional CFOs include team members with government contracting experience, and we bill by the hour for ongoing support. If you’re weighing fractional CFO services for the first time, we’re happy to talk through what it could look like for your business. with focused time on getting ready for the conversation. If you’d like to talk through your situation, we’re happy to listen. Contact Kerry George at kerry@crowncfo.com.