Government contractors working under cost-reimbursable or time-and-materials contracts know that DCAA timekeeping requirements affect far-reaching areas of contract accounting. Daily entries, accurate labor charging, and reliable documentation support compliant billing, indirect rate calculations, and successful audits.
In my experience, following a labor charge from the employee’s timesheet through labor distribution reveals why consistent practices support accurate contract costs and audit readiness.
Daily Timekeeping Sets the Foundation
Every employee plays a role in government contractor timekeeping. Delaying time entry until the end of the week makes it easier for employees to forget details, misstate hours, or charge labor to the wrong project. Recording all hours daily creates an accurate picture of where labor was spent and provides accounting personnel with dependable source data. I have found that these daily habits create the foundation for everything that follows.
Labor Distribution Connects Timesheets to Contract Costs
A completed timesheet does not finish the accounting process. Labor distribution for government contractors assigns payroll costs to the proper direct or indirect cost objectives using the hours employees recorded. Having that connection allows auditors to verify that labor costs appearing on invoices accurately reflect the work employees performed. Reliable labor cost allocation depends on accurate source data. A miscoded timesheet can affect contract costs long after payroll has been processed.
Direct and Indirect Labor Must Be Charged Correctly
Understanding the difference between direct and indirect labor helps employees make appropriate charging decisions each day. Direct labor supports a specific contract or task that benefits from the employee’s work. Indirect labor supports activities benefiting multiple contracts or the business as a whole, such as accounting, executive management, or business development. In my experience, employees make stronger charging decisions when they focus on the work actually performed rather than budget limitations, funding availability, or project preferences.
Floor Checks Show Whether Policy Became Practice
Many contractors become familiar with DCAA floor checks during the active performance of a contract. Auditors commonly ask employees how charge numbers are assigned, how often timesheets are completed, how corrections are handled, how direct and indirect work is identified, and whether all hours worked are recorded.
I have found that these reviews reveal whether the company’s stated process has become an ordinary routine or remains a policy that exists mainly on paper.
What Following Labor Charges Has Taught Me
Following labor charges from the first entry through billing has taught me that reliable government contractor accounting begins with disciplined daily habits. Accurate employee entries, documented approvals, controlled corrections, and consistent labor distribution create records that support contract billing and financial reporting throughout the life of a project. When those practices remain connected, the records reflect how the work actually happened.