Government Invoicing: Advice and Best Practices for Contractors

Efficient cash flow is essential for any business, big or small. And government contractors are no exception. However, navigating the intricacies of government invoicing can sometimes lead to delays and frustration. Unlike the private sector, federal payment cycles can be lengthy and riddled with specific requirements, which lead to delays and frustration. As a small business, late payments can strangle your cash flow and disrupt your business operations. 

In this blog post, we are sharing advice and best practices that will help you to submit clear, accurate contracting invoices that expedite payment and minimize delays. As a result, you can better focus on your projects and achieving long-term success in the federal contracting marketplace

Do government contracts pay upfront?

Typically, no. While there are occasional exceptions, government contracts most often do not pay the full amount upfront. The payment terms may vary depending on the nature of the contract, the specific goods or services delivered, and the preferences of the individual government agency that’s involved. 

Here is what contractors need to know about the most common types of payment arrangements for government invoicing:

  1. Progress payments are where the contractor sends invoices at different stages, or milestones, as the contract progresses. These can be made based on the completion of specific tasks or deliverables, project completion stages, performance benchmarks, or other measurable outcomes related to the project.
  2. Deliver payments, while less common, happen once the contractor delivers the goods or completes the services as specified in the contract. Before payment is issued, the government will complete an inspection to ensure they meet the agreed-upon requirement.
  3. Advance payments are rare but they typically happen in cost-reimbursement contracts when the government agency agrees to provide a partial, upfront payment to cover initial costs. These agreements typically have much stricter regulations.

How do government contractors get paid?

The government policy is to pay all contractors by electronic funds transfer (EFT) whenever possible. This process moves money digitally between accounts in a way that is more effective and secure than using physical checks. The government requirements related to EFT can be found in the Federal Acquisition Regulation site (specifically sections FAR 32.1110 along with FAR 52.232-33 and -34). This site can be a helpful resource as the language used in bids and contracts consists of specific clauses extracted from these sections.

What should a government contracting invoice look like?

Unlike the private sector, the invoicing process for government contracts can be a bit of a headache. Getting paid by the government requires strict adherence to the agency’s requirements and formatting. You may use your own invoice to bill the government, but you must make sure that it meets all of the requirements outlined in the contract. If it doesn’t, you will only slow your payment. 

That being said, you can create an invoice template to help speed up the process. Some of the details you will want to include in your template are:

  • Essential details such as your company name and address, invoice number, contract number, and your taxpayer identification number (TIN). 
  • Clear descriptions of the services performed or goods delivered, including if applicable, quantity and unit prices.
  • Payment preferences, terms, and banking information for EFT to ensure a smooth and speedy payout.
  • Information for a point of contact can be helpful to include for any invoice-related inquiries or issues.

While you can use your own invoice for government contracting, there are instances where an agency form might be easier. For example, one common form that is used with defense contracts is the DD Form 250, Material Inspection and Receiving Report. This invoice documents that the delivered materials meet contract specifics and enables the contractor to submit an invoice for payment.

Note: Subcontractors don’t need to use DD Form 250 (or most other government agency forms) for shipments to their primes unless that was specified in the subcontract.

What is a standard invoice for federal purchasing?

A standard invoice for federal purchases is a formal request for payment sent to a government agency by a contractor. It’s different from other types of invoices as it follows the requirements outlined in FAR. This helps to ensure efficiency and compliance while also aiming to reduce the risk of errors or disputes.

The exact information needed on this type of government contracting invoice will vary based on the project or agency, but they usually include elements such as:

  • Invoice number and date along with information details about the vendor and federal agency.
  • Purchase order number(s) assigned by the federal agency for the procurement transaction.
  • Detailed descriptions of delivered supplies or services performed.
  • A breakdown that includes quantities, unit prices, and total prices of goods or services.
  • Shipping details such as the shipment number, date, and weight.
  • Specifics on the payment terms which typically include banking instructions for EFT.
  • In some cases, you can add terms that provide discounts for prompt payment.

How long does a contractor have to submit an invoice?

The timeframe for a contractor to submit an invoice for their government contract will depend on the specific terms outlined in the agreement document. Still, there are generally some guidelines. Most notably, FAR, which oversees federal government contracts, includes clauses that detail invoice submissions, as well as payment timelines. To ensure smooth payment processing while also avoiding any disputes, contractors (and government agencies alike) must follow the agreed-upon terms.

When does the government make invoice payments?

Since 1982, the Prompt Payment Act has required the government to pay a small business contractor within 30 days of receiving a “proper invoice”. A proper invoice is defined as being free of errors and includes all the information required in the contract. Interest penalties will be automatically paid to the contractor if the payment is not made by the due date and if the government has not disputed the invoice in writing within 14 days of receipt. The Bureau of the Fiscal Service has a calculator to determine the amount of interest that has accrued using the most up-to-date rates.

Make government contracting faster and easier with FAMR

A well-constructed invoice is an essential tool for understanding and streamlining the government contracting process. By adhering to these government invoicing best practices and advice, you’ll find yourself better prepared to submit an invoice that is processed efficiently, minimizing delays and expediting your payment. 

At FAMR, our dedication lies in helping small businesses navigate the intricacies of the federal marketplace. With our team of government contracting experts, we’ll provide you with customized guidance to help you seize contract opportunities and expand your operations efficiently. We also offer marketing services that will boost your business and maximize its presence in the marketplace!

Ready to embark on this journey? Connect with us online today or give us a call to take the first step toward unlocking your business’s potential in the federal marketplace!

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