Tuesday, July 17, 2012

More on Accelerating Payments

Yesterday we discussed the new OMB initiative that encourages prime contractors to expedite payments to their subcontractors who are also small businesses. Agencies are being directed to expedite payment to all contractors, both small and large from 30 to 15 days so that those contractors can do the same with their subcontractors.

We've already gotten feedback from a couple of small businesses saying that their prime contractors do not want to implement required changes to their systems due to the limited duration on this initiative (one year). They're saying that the changes will be significant, costly, and time-consuming.

We wonder what they're talking about.

Unless contractors are small businesses, there is already an explicit requirement to pay subcontracts in 30 days (see FAR 52.216-7.b.). Any accounts receivable system (from Deltek down to QuickBooks) will allow you to enter various terms of payment, e.g. "net 30", :"net 15", etc. When a subcontractor invoice comes in, the accounts receivable person has to enter payment terms into the accounting/accounts receivable system. There is certainly no added effort to enter "net 15" as opposed to "net 30".

If your a small business subcontractor experiencing "push back" from your prime, don't buy the argument.

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