Case Study: Setting Up Compliant Bookkeeping for SBIR/STTR Contracts

A Professor’s Journey into Technology Entrepreneurship

Background
A professor at a leading research university had spent years working on advanced materials research. Driven by a passion for innovation, she decided to take her research from the lab to the marketplace. With the support of the university’s technology transfer office, the professor launched a startup focused on commercializing patented technology.

The Challenge
The professor knew external funding was essential to bring the technology to market, and Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs provided the perfect opportunity. However, as a scientist turned entrepreneur, she quickly realized that managing the financial aspects of the business—particularly complying with the rigorous requirements of government contracts—was not her expertise. Challenges included:

• Compliance Requirements: SBIR/STTR contracts come with strict guidelines, including tracking direct and indirect costs, timekeeping for personnel, and preparing auditable financial records.

• Complexity of Financial Tracking: Balancing the role of CEO and researcher meant the professor needed an efficient bookkeeping system that could separate grant-related expenses from other business costs while ensuring accurate invoicing and reporting.

• Risk of Non-Compliance: Without proper bookkeeping, the professor risked non-compliance, which could lead to loss of funding, penalties, or audit issues.

The Solution
Recognizing the critical need for a professional accounting solution, the professor partnered with Abaci Accounting, which provided a tailored financial management solution, ensuring compliance with SBIR/STTR requirements.

1. Setup of a Compliant Chart of Accounts
   Abaci Accounting created a detailed chart of accounts that categorized expenses according to SBIR/STTR guidelines, ensuring clear separation of allowable and unallowable costs. This setup helped the professor track expenses related to research, overhead, travel, and personnel effectively.

2. Timekeeping System Integration
   A crucial aspect of SBIR/STTR compliance is tracking labor costs accurately. Abaci Accounting implemented a timekeeping system that allowed the professor and the team to log hours in real-time. This system ensured that labor costs were directly tied to specific projects and research phases, minimizing discrepancies during audits.

3. Development of Policies and Procedures
   To maintain consistency and compliance, Abaci Accounting developed customized policies and procedures for the startup. These guidelines ensured that every financial transaction, time entry, and expense report adhered to government standards, providing a clear framework for the team to follow.

4. Monthly Financial Reporting
   Abaci Accounting provided monthly financial reports that aligned with government standards, offering the professor transparency and insight into the business’s financial health. These reports not only kept the startup compliant but also aided in making informed business decisions.

5. Agency/Project-Specific Reporting
   Recognizing the need for tailored reporting, Abaci Accounting created customized financial reports specific to the requirements of each funding agency and project. These reports included detailed breakdowns of costs, budget trackers, progress-based financial summaries, and compliance metrics to satisfy the unique expectations of agencies like the NSF, DOE, or NIH.

The Outcome
With Abaci Accounting’s support, the professor successfully navigated the complexities of SBIR/STTR financial management. The startup received Phase II funding, allowing for continued development of the technology. The compliant bookkeeping system put in place by Abaci Accounting ensured that the business was audit-ready, enabling confident scaling operations, hiring additional team members, and expanding lab space.

This case study illustrates the importance of a specialized, compliant bookkeeping and accounting solution for SBIR/STTR contracts, highlighting how Abaci Accounting empowers entrepreneurs to focus on innovation without the burden of financial compliance concerns.

For more information on how Abaci Accounting can assist with your SBIR/STTR compliance, contact us today!