The Three Numbers Every Government Contractor Should Know

Most business owners have access to more financial information than they know what to do with.

Monthly reports. Year-end statements. Invoices and bank reconciliations. The data is there. But knowing which numbers actually matter for running a healthy government contracting business is a different skill.

These are the three you should be watching.

1. Indirect Rate

Your indirect rate is the percentage that represents your shared business costs relative to your direct work. It covers overhead, general and administrative expenses, and fringe benefits, the costs that exist regardless of which contract you are working on.

Why it matters: every proposal you submit and every invoice you generate should reflect your current indirect rate. If your rate has shifted since you last calculated it, your pricing is off. Knowing this number keeps your proposals accurate and your billing defensible.

How often to check it: at minimum quarterly, ideally monthly for active contractors.

2. Cash Runway

Cash runway is how many weeks or months your business can operate at its current spend rate before incoming payments are needed to cover costs.

Why it matters: federal contracts often have longer payment cycles than standard commercial work. Knowing your runway tells you how much cushion you have before cash timing becomes a problem. It also tells you whether you can afford to take on a new contract, hire someone, or invest in the business.

How often to check it: weekly for active contractors, especially around billing cycles.

3. Contract Margin

Contract margin is the difference between what a contract pays you and what it costs you to deliver. It accounts for direct costs and the share of indirect costs allocated to that contract.

Why it matters: revenue is not the same as profit. A contract can generate significant revenue while contributing very little to the health of the business if the costs are not managed. Knowing your margin by contract lets you identify where the business is performing well and where it needs attention.

How often to check it: monthly during contract execution.

Why These Three

Indirect rate, cash runway, and contract margin connect the three most common pressure points in government contracting: pricing, cash flow, and profitability. Each one informs the others. A strong margin is harder to sustain when your indirect rate is inaccurate. Cash runway problems often trace back to billing timing on low-margin contracts.

You do not need a finance team to track these. You need clean books structured to produce them, and a routine that puts these numbers in front of you regularly.

👉 Start with the Free Cash Flow Training. It's a great place to understand how your books, your billing, and your cash flow connect.

Ready to go deeper? Book a GovCon Financial Readiness Call.