Selling goods or services to the Federal government, without question, brings with it some of the most difficult receivables processes in the O2C Space. The complex network of regulations and technology requirements can create long delays and in some cases, non-payment.
Elementary My Dear Watson?
There are some basic fundamentals of dealing with the Federal Government, which include: gaining an understanding of the laws and compliance regulations that govern payment practices, comprehending their interpretations and definitions, and knowing the contract requirements. These are a vendor's best weapons in the crusade for receivables management with the government.
But what we’ve learned over the years is that there is a significant shortage of experts deployed in vendor AR departments who know the detailed nuances of collecting from the federal government, who understand the contracts, and most importantly in the complete Order-to-Cash lifecycle.
Simply put, the process is vastly different from that of a typical collections approach and the rules change frequently. The role is not as efficient as seen in traditional enterprise organizations.
Federal Collections = Complex Nuances
The nuances presented by federal receivables create a tangled web of complexity.
Take for example the Prompt Payment Act (PPA), which was enacted to ensure timely payments from the federal government. When payments are not made within the 30-day window, interest should automatically be paid. Yet the processes and technology required to make that happen isn’t always in place within vendor AR departments. Are advanced payments or cost reimbursable contracts handled differently? The process becomes even more complex when payment isn’t made on time. Who’s watching the interest percentage and if it’s being paid? How are claims filed and followed up on? Under the PPA, “proper invoicing” must be in place to ensure invoices are paid on time. What is the root cause of improper invoicing? We haven’t even touched on the DOD and 3 way match? Are you intrigued?
All of these questions make for a cumbersome processes mandated by the federal government. The expertise to meet these challenges is not easily found.
Reducing Complexity with Expertise
Over the years, we at Capgemini have been providing Finance and Accounting Business Process Outsourcing solutions that combines leading technology and best-in-class processes to deliver seamless Order-to-Cash (O2C) to help our clients navigate the cumbersome processes mandated by the Federal Government.
What we’ve learned over the years is that there are a few fundamental requirements that can significantly reduce revenue leakage and mitigate compliance risks. These include:
- Deep understanding of compliance issues in government payment practices
- Contract evaluation and interpretation
- In-depth understanding of details outlined in the Prompt Payment Act and DD250
- Expertise in electronic invoicing and claims management
Considering federal government contracts are frequently in the hundreds of millions in dollar range, not having these fundamentals mastered means serious compliance risk and massive revenue leakage, thereby defeating the reason for kicking off a relationship with the government.