We recently have had some discussions with clients about becoming government contractors. The question always becomes, at least in the eye of the prospective contractor, easy money. However, that is not the case.
Yes, government contracting can be a very good way to enhance your business and make good money. That depends if you have bid the contract in a profitable manner, have the expertise required and understand how the government pays.
Many contractors place undue reliance and dependence upon the government contract. If that is the case, cash flow always becomes an issue. Yes, the government will pay, provided you deliver the goods that you said you were contracted to do. The issue is always the timing of the payment! Sometimes, government contracts are paid in 120-150 days past the due date. If your business is using the government payments for cash flow, the problems begin.
If you decide to become a government contractor, pay close attention to your pay timeline. If you don’t have the line of credit or additional cash in order to “float” the bill until the government payment arrives, then becoming a government contractor may not make good sense. This is an issue that requires some great thinking before becoming engaged in government contracting. Knowing what you are getting involved in up front solves many challenges and problems!