Richard Marksberry presented this presentation at the PVBS monthly seminar today at the Microsoft Innovation Center in Reston. To a packed room, Rich spoke about how legacy accounting software such as from Quickbooks, Deltek and older systems are significantly hampering growth at government contractors who use them. Great things to learn in the presentation.
Microsoft announced at its worldwide partner conference last week in Washington DC that Pleasant Valley Business Solutions (PVBS) had been recognized as one of the top three Dynamics NAV partner worldwide in the Microsoft Dynamics NAV Partner of the Year award category for the second year in a row. PVBS offers the premier Microsoft-based solution for government contractor ERP, project accounting and financial management.
Awards were presented in a number of categories, with winners and finalists chosen from a pool of almost 3,000 entrants worldwide. The Microsoft Dynamics NAV Partner of the Year Award honors partners who have exhibited excellence in providing innovative and unique solutions based on Microsoft Dynamics NAV. Read the press release.
From the June/July “High-Growth Government Contractor News“.
We were guests on the Federal News Radio Gov Con Straight Talk show to discuss management strategies for companies that provide services to the government and want to start selling products, and vice versa. Companies that sell products to the Federal Government are always looking for ways to expand into more lucrative and higher margin service offerings. And service providers are often looking for product offerings to round out their business lines. Either way, it’s easier said than done. Listen to the show here.
On the show, Rich Marksberry of ROM & Associates, Christine Zmuda of Microsoft, and I discussed the major issues companies typically face when adding products or services to the mix. Product companies are concerned with managing high-volume transactions, which requires effective order management, quoting processes, and inventory and shipping controls, among many other challenges. Services, however, are typically done over a long period of time and require rigid tracking of billing and related implementation activities.
Product companies now providing services need to comply with Federal Acquisition Regulations (FAR) and well as Defense Contract Audit Agency (DCAA) compliance. Both are usually quite foreign to existing operations. Listen to the show for the management concerns you also need to be aware of.
Also, I invite you to visit our new YouTube channel to see our new solutions overviews and testimonials.
Check out this podcast that our friends over at Tatum recorded the other day. Government contractors are required to maintain accounting systems that will be reviewed by DCAA and deemed acceptable or unacceptable. As you are aware, maintaining a DCAA accepted accounting system goes beyond the purchase of a DCAA-approved ERP and financial management accounting software solution, such as Microsoft Dynamics NAV for Government Contractors from PVBS. This podcast discusses the steps needed in maintaining an acceptable accounting system. Some topics covered will be how to set up and maintain a logical chart of accounts; identifying and segregating unallowable costs; the importance of annual cost structure reviews; and difficulties you may face along the way and how to avoid them.
The following article appeared on February 16 in MSDynamicsWorld.com.
Dynamics Outgrows Oracle and SAP in Recent Poll
In the current economic downturn, the market share of Tier II smaller ERP providers has risen significantly while those of ERP heavyweights SAP and Oracle have dropped proportionately and Microsoft Dynamics edged slightly ahead. According to a 2010 survey by vendor-neutral ERP consultants Panorama Consulting Group, the market share of Tier II ERP vendors grew from 23% to 30% last year while ERP leader SAP dropped from 35% to 31% and Oracle from 28% to 25%. Microsoft Dynamics held its own, growing slightly from 14% to 15% during the same period. Panorama’s 2008 survey was based on 1,300 respondents worldwide from 2005 to 2008 while the 2010 survey was tallied from 1,600 participants last year.
Panorama President Eric Kimberling said the market changes reflect that small- and medium-sized companies have been moving ahead with ERP implementations in the downturn while larger firms have been holding back on upgrades and modifications.
“Microsoft is a better fit and more appealing in a downturn,” Kimberling said. “It has a much lower cost and is very predictable (in implementation).” Even though the rise in Dynamics’ market share is slight, it is still significant in light of the declines for SAP and Oracle, he added.
The 2010 survey also ranked Microsoft Dynamics No. 2 behind SAP on ERP vendor short lists by prospective buyers and seventh of the top 10 in selection. In its 2008 report, the Denver, Co.-based consulting firm pointed out that the cost savings for Microsoft Dynamics is great, with an SAP implementation averaging $16.8 million in total costs compared to $12.6 million for Oracle, $2.6 million for Microsoft Dynamics and $3.5 million for Tier II applications. In that detailed study, Panorama concluded that Dynamics was gaining in popularity because of its markedly lower pricetag; Dynamics was favored by users, who like the familiar Microsoft interface, but less popular with executives, who cited a somewhat higher business risk.
One cause for higher risk worries in the earlier study was Dynamics’ lack of business intelligence tools, Kimberling said. However, Microsoft may have alleviated that concern with Dynamics’ addition of FRx financial reporting tool, he said. FRx is already slated to be replaced by Management Reporter and augmented with self-service reporting in Office 2010. Also contributing to a higher perceived risk factor with Dynamics is the small- to mid-sized market it serves rather than the software itself, he said. Smaller customers lack the sophistication of larger enterprises and often try to cut corners and/or implement the software without recognizing the need for specialized help, he said.
Project Duration and Cost
Comparative marks for project implementation in the earlier study also were a mixed bag for Microsoft Dynamics, which averaged two weeks to two months less than Oracle and SAP, respectively, but, on the downside, showed the largest variability in project completion. The major factors extending project duration for Dynamics ERP installs are large numbers of modules and/or users and complex business processes, Kimberling said. In the latter case, companies often are too quick to customize the software to existing business workflows rather than change their processes to accommodate the software, he said. While minimizing the ERP impact to the workforce, customizing software with alterations to the source code delays the project and complicates maintenance down the road, he said.
In its 2010 report released early this month, Panorama concluded that more ERP implementations last year took longer than expected (57%) and cost more than expected (59%) but, on the plus side, they consumed 20% less as a percentage of annual revenue (6.9% in 2009 vs. 9% in 2008). However, the “savings” came with a price: 41% of responding companies failed to achieve at least half of the benefits they anticipated from their ERP installations. These results have not yet been broken down by vendor.
“The path to lower costs is cutting the scope or key project activities that are critical to success,” Kimberling said, citing factors like training, hardware and project management. “You don’t necessarily need to spend more but you need to have realistic expectations and take the right steps to make sure you succeed. This is even harder now with less resources.”
Managing Organizational Change
In addition, the 2010 study concluded that most companies do not effectively manage the organizational changes that ERP sets in motion, with nearly half citing poor communication between management and employees as a contributing factor. Many companies also were adjusting to a new CEO during their ERP implementations while significant numbers were coping with layoffs or a merger or acquisition.
The problem is that there is a management/employee “disconnect,” Kimberling said. New ERP systems impose change and stress on the workforce when employees are already worried about their future, he said. But management wants to push ahead with ERP systems now to retain “head knowledge” and increase efficiency to do more with less, he said. In this environment, some companies are cutting organizational change activities related to their ERP installs, which “doesn’t bode well” for their projects, he said.
Panorama’s latest survey found that SaaS (Software-as-a-Service) and hosted ERP solutions are faster to implement and cost less than on-premise applications. The downside: they are far more likely to exceed budget estimates due to excessive vendor hype, the report said. In addition, SaaS and hosted solutions tend to be more appropriate for small- and mid-sized companies and narrow functions such as CRM or purchasing, the report said. Microsoft Dynamics does not currently have a SaaS or hosted ERP offering (although various partners and resellers do offer hosted solutions), but Kimberling predicted that Microsoft will develop one because so many mid-market companies perceive that SaaS/hosted is a way to tiptoe into ERP without a big, upfront cost, he said.
Kimberling also predicted that IT budgets are beginning to loosen up and companies that skimped to get by last year are beginning to look at adding tools like FRx that can improve operations. As for other future trends, Kimberling said that SAP and Oracle will try to grow their respective markets by extending down from the enterprise to the mid-market. Although this will provide more competition for the Dynamics product line, Microsoft is already “well entrenched,” and has its name and branding on its side, he said.
Steve Miller, Powertek Corporation Vice President of Finance, presented why his firm chose Microsoft Dynamics NAV for Government Contractors at the Microsoft Third Annual Government Contractor Summit. Download a copy of the presentation here. PowerTek Case Study for Microsoft GovCon Summit, 111709
Powertek’s rapid and sustainable growth over the past three years has contributed to its becoming recognized as a leading provider of information technology and business management solutions. Since its incorporation in 2001, Powertek continues to earn the trust and loyalty of its customers by demonstrating an in-depth understanding of their dynamic business and technical environments and providing holistic and innovative solutions to their unique needs. The firm’s continued success and repeat business validate the confidence its customers have in its capabilities.
One of our accounting firm partners, Goodman & Company, will host its 14th Annual Government Contracting Update Seminar on Thursday, October 22, at the Tysons Corner Sheraton Premiere, as well as, Thursday, November 12, at the Westin at Virginia Beach Town Center from 8:00 a.m. to 5:00 p.m. PVBS Vice President Paul Skurpski will present a keynote presentation at both events.
The title of the presentation is “Optimizing Your Accounting Solution’s Reporting Capabilities.” Skurpski will discuss:
- Challenges Facing Government Contractors and Reporting
- The Government Client as an Information Consumer
- Standard Reports You Should Be Receiving
- What are Your Internal Audiences Expecting from Reporting?
- The Future of Reporting
We are very excited about our partnership with DecisionEdge Software to bring government contractors a comprehensive but easy-to-use earned value management (EVM) solution. Government contractors need to have an EVM solution in place in order to comply with ANSI standard 748, and most are looking for the easiest, least intrusive solution to meet compliance. We have found that the DecisionEdge Earned Value Manager is an excellent complement to the Microsoft Dynamics NAV for Government Contractors financial management solution and gives our clients what they need to comply.
PVBS and DecisionEdge will be demonstrating the complete solution at a lunch seminar on September 10 at the Microsoft Technology Innovation Center in Reston. This event will be a great way for government contractors to see the breadth of solutions available for them to meet DCAA and EVM compliance. Click here to register for the seminar.
The DecisionEdge EVM solution produces reports and graphics that help government contractors mine rich data to make sound business decisions about their contracts. And it integrates with Microsoft Office Project and Microsoft Dynamics NAV for Government Contractors to generate the comprehensive reports that the government requires.
To learn more about EVM, send Bernard Mustafa an email and he’ll send you a copy of the NDIA’s Earned Value Management Systems Intent Guide which discusses EVM in detail.
The following article was submitted by Richard Marksberry, former Partner in the MidAtlantic practice of Tatum, LLC. During the last four years Mr. Marksberry has, as the CFO, led the selection and implementation of accounting systems for three federal contractors each with sales over $100 million annually. He was recognized as one of the “Top 10 CFO’s in Government Contracting” by ExecutiveBiz in 2008.
The $787 billion gorilla has come out of the corner! The Administration is finding out that it is easier to say “stimulus,” than it is to actually spend the money. With its slow start the American Recovery and Reinvestment Act (ARRA) distributions are reminiscent of the movie Brewster’s Millions, except that the “inheritance” is a growing economy. And, although the current Administration’s desire is to cut back on government contracting, this will be one of the key ways the stimulus money will have to be spent.
The channels for this spending will be through Federal, State and local governments and will be geared toward infrastructure where possible. This is the crux of the issue as the “rules” for the spending and its oversight will differ depending on the primary or first tier source of the funding (or the prime contract source). The rules and reporting requirements are an “enhancement” of the Federal contracting rules under the Federal Acquisition Regulations (FAR). These enhancements support the Administration’s desire to have greater “oversight and accountability” along with more “transparency.” Ultimately the need to show and report results are important to the success of this effort.
As a result of these changes, there are a number of potential complications for Federal contractors. The following are some that I believe are the key ones to be prepared for during the first wave of funding:
- Extended Reporting Requirements
- Job Creation Statistics
- Focus on Buy American
- Audit Rules Extensions
- Wage Rate Specifications
The extended reporting requirements are not very clear and are scheduled to be changed in the next quarter. For now we know that there are two requirements to keep in mind. The first is that if you receive funds from the ARRA you are required to report the salaries of the company’s top five wage earners. Not a change for public or not-for-profit companies, but this is new for private companies who are not accustomed to this level of information dissemination. Oh, and incidentally, if you are a private company with a contract initiated prior to the ARRA, and if ARRA funding is allocated to your contract in the effort to complete spending, you will find yourself in the enhanced reporting requirement for current and comparative prior years!
The other reporting requirement, and pull out your thinking cap, is for “progress being made,” “detail” of how recovery funds are being spent, and the number of jobs “created or preserved” by the use of ARRA funds. Systems that allow for tagging of transactional information with multiple uses will be necessary unless you want to maintain and reconcile multiple ledgers for the same transaction. This could get complicated and hard to audit, but more on that later. Perhaps the initial quarter reporting under ARRA will help in defining the way forward. Clarity of this kind of reporting may be yet down the road, though it is still a current requirement.
The Buy American focus is mainly for raw materials used in construction, however, it is not altogether clear when it comes to compliance with the various international trade agreements. It appears to result in tighter restrictions at the state and local contracting level than at the Federal level. Restrictions may vary from country to country, the type of material, and if it is a Federal, state or local project. Due to the level of complexity here and the need to be competitive but profitable, I feel an analysis is necessary in each case before bidding the contract in question.
Audit rules have taken on a new life under the ARRA! As soon as ARRA funding is in the mix you may expand your authoritative audit agencies by up to four or five agencies including the new “Recovery Accountability and Transparency Board.” Additionally, the rules give new levels of access to documents, records, and personnel. To state it plainly, when ARRA funds are used the Comptroller General and the agency inspector general are granted access to any transactional support, including the interview of contractor officers and employees related to the transaction. The ruling applies to all contract types, not just cost plus, and extends to commercial item contracts and commercially available off-the-shelf item contracts! And why stop there when you have a good thing going? The extended audit rules also apply to those contracts that are at or below the simplified acquisition threshold, which was originally established by the Federal Acquisition Streamlining Act (FASA) to help level the playing field for small government contractors.
In relation to wage rates the Act specifies that the use of prevailing wage rates specified by the U.S. Department of Labor. Many construction contractors are familiar with this “contract requirement”, however under ARRA there are additional considerations for the proper level of spending for services contracted for by the government as it applies to all requisite labor types. This may add complications of varying wage rates when an employee works on multiple contracts, and only some are ARRA funded. Again we see the need for sophisticated accounting and payroll systems for even entry level companies.
One last point is important to note. In most federal government contracting there are “flow down rules” for requirements that must be adhered to by both the prime and subcontractors as they “flow-down” to subs. Rule enhancements appear to apply to the prime and subcontractors in all cases. The advantages that were often provided for small and emerging contractors do not seem to have a place in ARRA and this new need for “transparency, oversight and accountability.”
Accounting, finance, and operations executives at fast-growing government contractors want to ensure that the government contractor accounting solution they choose meets and exceeds their requirements. PVBS offers demos regularly at our customer’s offices or in our state-of-the-art training center in Reston. We also offer online demos for our many customers across the US and worldwide.
Click here to schedule a demo of Microsoft Dynamics NAV for Government Contractors from PVBS.