Industries

CPA Services for Engineering Firms

Engineering firms carry an accounting requirement most service businesses never meet: the rate at which indirect cost is loaded onto a job is not only a management figure. On public work it is calculated to a prescribed standard, submitted, and sometimes examined — so the books have to be built to support it from the first entry, not assembled to match it afterwards.

Job cost accounting is the foundation, not a report

Every hour, not just the billable ones

An indirect rate is direct labor on one side and everything else on the other. That arithmetic only works if time is captured against a job code for all hours worked — including proposals, training, administration and leave. Timekeeping designed to produce invoices routinely fails this, because it stops recording once an hour is known to be unbillable, and the missing hours quietly distort the rate in both directions.

Costs that are not allowed to be in the pool

Firms working for public agencies develop their indirect rate under the federal cost principles, which exclude categories of cost outright — entertainment, certain advertising, some interest and owner compensation above what the work supports. Those exclusions are far easier to apply if the chart of accounts separates them all year than if they are dug back out of general ledger detail in the spring.

Where our work stops

Above certain thresholds, agencies including the state department of transportation require the overhead rate to be examined by a CPA firm. We do not perform attest engagements of any kind. What we can do is get the underlying accounting into a state where that examination is straightforward, and work alongside the firm that performs it. Being told this at the start is more useful than being told it in June.

Contracts, subconsultants and getting paid

Prime and sub are different businesses on paper

Carrying subconsultants as prime runs their fees through your revenue. Profit is unchanged; gross receipts are not, and gross receipts decide method-of-accounting eligibility, feed state apportionment formulas and sit behind several other tests. It also puts information reporting for every sub on your side of the ledger.

Retainage and public payment cycles

Money earned and held back is income to an accrual-method firm before it is cash in the account, which is how a profitable year and a difficult year can be the same year. Estimated payments have to be planned against the income figure rather than the bank balance, and a line of credit priced before the crunch is cheaper than one arranged during it.

Staff who work in other states

A firm's own filing obligations follow its projects, but employees create a second, separate problem: a state generally expects income tax withheld for work physically performed inside it, and the thresholds for that are low and inconsistent between states. A survey crew or a resident engineer on a site across a state line can trigger registration, withholding and quarterly filings that nobody at the firm has been asked about. The fix is a rule for tracking days on site, applied while the project runs.

Field equipment, vehicles and software

Survey instruments, testing and monitoring equipment, drones and field trucks are all capital decisions with a timing choice attached, and the choice between mileage and actual cost on a vehicle is made per vehicle and is not freely reversible later. What makes any of it hold up is contemporaneous records — miles, fuel, repairs, personal use — kept during the year. Software is the mirror image: perpetual licenses, subscriptions and internally developed tools are not deducted on the same schedule as each other.

Research credit claims, and the contract that decides them

Engineering firms hear the same cold calls architects do, and for engineering work the answer usually turns on the contract rather than on the technical merit. Where the client pays regardless of whether the technical objective is met, the research is funded by them and the credit generally is not yours; where you carry the risk and retain rights in the result, there may be a claim. Any claim needs project-level and employee-level records made while the work happens. We will look at it honestly and tell you when it is not there.

Where this fits with the rest of the practice

Business Tax — entity returns, multi-state filings and compliance.
Bookkeeping Services — job cost records, the monthly close and the indirect cost pool.
Tax Planning & Advisory — equipment timing, entity choice and estimated payments.
Personal Tax — the owners' returns, prepared alongside the firm's.

The services behind this

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