Guide · Software
DCAA compliant accounting software: what actually exists
No product is DCAA approved. Not QuickBooks, not Costpoint, not Unanet, not anything a salesperson tells you. What gets evaluated is your system, and here is what each package does and does not solve.
- 12 years inside DCAA
- 100+ DoD contractors audited
- CPA led
- QuickBooks, Costpoint, Unanet
- Remote, nationwide
The short answer
There is no such thing as DCAA approved accounting software, and there never has been. DCAA does not certify, approve or endorse any product. It evaluates a contractor’s accounting system, which means the software plus the chart of accounts, the pools and bases, the timekeeping, the written procedures and the way all of it is operated every month.
Vendors know this and still market the phrase, because contractors search for it. Solicitations occasionally use it loosely too. Anyone who tells you their product is DCAA approved is either mistaken or counting on you not knowing.
Two companies on identical QuickBooks subscriptions can get opposite answers from the same auditor. One segregated direct and indirect cost, set up job costing by contract, runs timesheets that reconcile to payroll and keeps unallowables out of the pools. The other installed the same product and changed nothing.
That said, the choice still matters. Some packages make compliance much easier to achieve and maintain, and the wrong choice for your size wastes money in both directions.
Requirements
What the software actually has to do
Strip away the marketing and the accounting system has to produce a short list of things, most of which come from the SF 1408 criteria and the DFARS accounting system clause.
- Separate direct from indirect cost, and accumulate cost by contract
- Allocate indirect cost on a logical and consistent basis, through pools and bases you defined
- Run under general ledger control, so job cost ties to the financial statements
- Record labour by cost objective, with a distribution that reconciles to payroll
- Identify and exclude costs that are unallowable under FAR Part 31
- Produce contract cost at least monthly
- Support billing, including the limitation of cost and funds clauses
Every item on that list is a configuration decision before it is a software feature. That is the whole reason no product can be approved on its own.
The market
The realistic options
| Package | Suits | Strength | Watch out for |
|---|---|---|---|
| QuickBooks Online | 1 to roughly 40 people | Cheap, universal, every accountant knows it, your data stays portable | Job costing and timekeeping need deliberate setup; indirect rates are calculated outside it |
| QuickBooks plus a compliance add-on | 5 to 50 | Adds timekeeping discipline and rate math on top of familiar software | Monthly cost on top of QuickBooks; the add-on does not make judgments for you |
| Unanet | 20 to several hundred | Built for project accounting and GovCon from the ground up | Real implementation effort and cost; overkill below about twenty people |
| Deltek Costpoint | Roughly 50 and up | The deep end: full project accounting, rates, compliance reporting | Expensive to buy and to run; needs someone whose job is to operate it |
| Xero, Wave, spreadsheets | Not for cost-type work | Fine for simple commercial businesses | No practical path to contract-level cost accumulation at the required standard |
General guidance, not a product endorsement. Vendor pricing and capability change; verify before committing. We work in QuickBooks, Costpoint and Unanet and have no reseller relationship with any of them.
The common question
Can QuickBooks really work?
Yes, for most small contractors, and we say that having audited companies on every package. The question is never whether QuickBooks can pass. It is whether yours is set up to.
What has to be true: a chart of accounts built so direct, indirect and unallowable costs are structurally separate rather than remembered; customers and projects used to accumulate cost by contract; timekeeping that captures total time for everyone and reconciles to payroll; a documented pool and base structure with rates calculated consistently each month; written procedures describing what the people actually do.
What QuickBooks will not do on its own is calculate your indirect rates, stop you putting an unallowable cost in a pool, or produce an incurred cost submission. Those are handled alongside it, which is normal and is how most companies under fifty people operate.
The detailed setup is in is QuickBooks DCAA compliant, and the Costpoint alternatives guide covers when you have genuinely outgrown it.
Decision
How to choose, by size
Under 10 people, one or two contracts
QuickBooks Online, configured properly, plus timekeeping. Anything heavier is buying capability you will not use and administration you cannot staff.
10 to 25, cost-type work
Still QuickBooks for most, with a timekeeping tool and monthly rate calculations run alongside. This is where discipline matters more than software.
25 to 50, multiple contract types
The decision point. A compliance add-on usually buys more than migrating does, unless you are also adding people who need project visibility.
50 and up, or several cost-type contracts
Purpose-built project accounting starts to pay for itself, because the manual work around the edges has become somebody’s full-time job.
Headcount is a proxy. The real triggers are the number of contracts, how many indirect pools you run, and whether work happens at more than one location.
Add-ons
What a compliance add-on actually buys
Add-ons that sit on top of QuickBooks typically bring structured timekeeping with an audit trail, labour distribution, indirect rate calculation and some compliance reporting. For a company that would otherwise do rate math in a spreadsheet, that is real value, and it makes the work more consistent month to month.
What they do not buy is judgment. The add-on will calculate a rate from whatever you put in the pool. If an unallowable cost is in there, you get a clean, confident, contaminated rate on every invoice. That is the same problem automation has everywhere: the output looks finished whether or not it is right.
We compare buying a tool against outsourcing the work in software versus outsourced accounting, and the broader version of this question in can AI replace your accountant.
How we help
What this costs
We set the system up in whatever you already own, usually QuickBooks, and we do not sell software or take referral fees. A DCAA compliant accounting system build covers the chart of accounts, job costing, timekeeping, the pool and base structure and written procedures. Pre-award readiness starts at $2,500 and the indirect rate structure at $3,000.
Running it is $800 a month for Core or $1,500 for Cost-Type, which adds monthly indirect rate calculations and provisional billing rates tracked against actuals. All published on the pricing page.
If you are choosing software right now, the free intro call is a reasonable place to sanity check it before you sign anything.
Questions
Frequently asked
What is DCAA compliant accounting software?
There is no such product. DCAA does not approve, certify or endorse accounting software. It evaluates a contractor’s accounting system, meaning the software together with the chart of accounts, pools and bases, timekeeping, written procedures and how they are operated. Software can make compliance easier, but compliance is a property of your setup, not of a package.
Is QuickBooks DCAA compliant?
QuickBooks can support a compliant system for most small contractors once it is configured for it: direct, indirect and unallowable costs structurally separated, cost accumulated by contract, timekeeping that reconciles to payroll, and a documented rate structure. Out of the box it is not set up that way.
Do I need Deltek Costpoint?
Usually not below about fifty people. Costpoint is deep project accounting software with a cost and administrative load to match. Most small contractors pass reviews on properly configured QuickBooks, and the money is better spent on getting the structure right.
Is there government approved accounting software?
No. Neither DCAA nor DCMA approves software. What can be approved, for a contractor and usually in connection with specific contracts, is the accounting system, after a pre-award survey on Standard Form 1408 or a post-award review. That approval attaches to your company, not to a product.
What about compliance add-ons for QuickBooks?
They add structured timekeeping, labour distribution and rate calculation, which is genuinely useful if you would otherwise be doing rate math in a spreadsheet. They do not make judgment calls, so an unallowable cost in the pool still produces a contaminated rate on every invoice.
Will switching software fix a failed accounting system review?
Almost never. Reviews fail on structure and discipline: costs not segregated, timekeeping that does not reconcile, unallowables in the pools, no written procedures. New software inherits all of those. Fix the structure first, then decide whether the tool is the constraint.
Can we use Xero or Wave for government contracts?
Not realistically for cost-type work. Neither gives you a practical route to contract-level cost accumulation with indirect allocation at the standard a review expects. For firm-fixed-price work with no cost reporting, they can be fine.
More
Related services and guides
DCAA compliant accounting system setup
Chart of accounts, job cost, timekeeping and rate structure, built in your own QuickBooks.
Guide: is QuickBooks DCAA compliant?
The configuration that lets QuickBooks pass, step by step.
Guide: Deltek Costpoint alternatives
What small contractors actually need, and when Costpoint is more than the contract requires.
SF 1408 readiness self-check
11 questions, about 3 minutes. See which parts of your system an auditor would flag.
Alexander Mungov, CPA
Founder and principal, M2 CPA
Alexander Mungov spent twelve years at the Defense Contract Audit Agency, in the Denver, European and Afghanistan branch offices, finishing as a Supervisory Auditor leading a team of six. He then built and ran the FAR, DFARS and CAS compliance program inside a defense technology company.
He founded M2 CPA to give small and mid-size contractors the compliance support that large primes take for granted. More about Alex.
Sources: Standard Form 1408 (Rev. 1/2014); DFARS 252.242-7006 as renumbered under DoD Class Deviation 2026-O0050; FAR Part 31. Product descriptions are general guidance as of October 2026 and are not endorsements; M2 CPA has no reseller or referral relationship with any accounting software vendor. Verify vendor capability and pricing directly.
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