Looking for a way to sell to government and big institutions without running short of cash? Steven Palmieri, a Tax CFO, works on the cash side of that sale, and the news is mixed. The wait is built into the process, and the process runs on a clock you can learn.
A federal agency pays under a federal prompt payment rule that starts counting when a proper invoice arrives. An invoice that is not proper is sent back, and the clock runs from the date a proper one arrives, so a correct invoice is worth more than a quick one.
Texas state agencies follow their own prompt payment law, Government Code chapter 2251. A city, a county or a school district has its own terms, often written into the purchase order. A hospital system sets its terms in the vendor agreement. Each of these customers runs a process, and your invoice has to move through it.
Lackland sits inside the San Antonio city limits and is the base where Air Force enlisted basic training is held. A vendor to a place that large keeps to a calendar that was set long before the vendor arrived, and the invoicing has to fit it.
If you are a subcontractor, the government's clock is not your clock. A prime contractor pays its subs under the terms of the subcontract, which may allow payment only after the prime itself is paid. Read that clause before you sign, and put the number of days in your cash plan, and ask an attorney whether any statute adds a limit. A long subcontract wait can catch a small firm off guard right after it wins a good job.
Federal offerors must be registered in SAM.gov when they submit an offer, and the registration has to be renewed every 365 days. Put the renewal date on the calendar next to the sales tax return, and check it each quarter. State and city vendors have their own setup, usually a vendor number and bank details on file, and a mismatch there delays payment as well.
We work on the money side. We time the invoices so they match the contract and go out the day the work is accepted. We keep the receivables list current and read it with you every month. We build a cash plan that carries the wait, and we keep the books in the order a contracting officer's questions would follow.
A review of a government accounting system is specialist work. We will tell you who does it, and we will have your books ready for them. Reading a contract for its legal risk is an attorney's job. We read it for the payment terms and nothing else. The page on when you need a licensed firm draws that line in more detail.
Earned in the spring, accepted by the agency in the summer, paid in the fall, and needed for payroll all the way through. That is the pattern we write down for each customer, one at a time, as a made-up example for planning and nothing more.
Tax follows the books. If you use the accrual method, the income from an accepted invoice counts when it is earned, and the tax estimate can arrive before the check does. A Tax CFO sets the estimate knowing what has been collected and what is still open. The page on profit on paper and cash in the mail explains why, and when a big contract lands covers the months right after you win.
On a free Second Look call, walk us through your contract's payment terms and we will mark the clock together. The visit is free and signature-free.
You will be talking to the Steven Palmieri practice.