For innovative startups, grants from the NIH (National Institutes of Health), NSF (National Science Foundation), and SBIR (Small Business Innovation Research) programs can be a major funding boost. However, these funding sources come with unique and complex accounting requirements. At Kruze Consulting, we offer specialized NIH, NSF, and SBIR accounting services as part of our ongoing support for seed and venture-funded startups, keeping you compliant, audit-ready, and focused on growth.
Why Grant Accounting Matters
Securing a federal grant is a major milestone, but it’s just the beginning. Each agency requires companies to have an approved budget for every grant or project. You must also provide detailed accounting reports that show exactly how you spent your funds and document that your spending followed the approved budget. This level of scrutiny requires that your accounting system and processes be detailed and precise.
Expense Categories: Direct, Indirect, and Excluded
Expenses under these grants typically fall into three categories:
- Direct costs. Expenses that are directly tied to the project, including salaries for project staff, equipment, and materials.
- Indirect costs. Shared expenses like rent, administrative salaries, and utilities that support the project but aren’t directly attributable to it.
- Excluded costs. Expenses that are not allowed under the grant guidelines and that must be carefully tracked to ensure they are not charged to the grant.
A robust accounting system is crucial for accurately capturing and allocating approved expenses while excluding unauthorized costs. Kruze Consulting helps startups implement and maintain systems that meet these requirements.
The Importance of Time Tracking
One of the most critical – and often overlooked – components of grant compliance is careful time tracking. Federal agencies require companies to properly capture and allocate employee costs to each project. Using a reliable time-tracking tool ensures that payroll and labor costs are allocated correctly, maximizing your grant benefits and keeping you audit-ready.
Proving Operational Stability
As your startup progresses to later-stage grants, agencies may require evidence of your operational stability and funding to prove you can complete your projects. Kruze Consulting’s experienced team can help you prepare both project-specific and overall business projections, demonstrating your company’s ability to deliver on its grant commitments.
Audit Requirements: What You Need to Know
If your grant funding and spending reach $750,000 or more in a grant year, you are required to have a third-party audit of your records. Navigating this process can be daunting, but Kruze Consulting can introduce you to qualified auditors who specialize in NIH, NSF, and SBIR grant audits. We’ll guide you through the audit process, making sure your records are organized, compliant, and ready for review.
How Kruze Consulting Supports Grant-Funded Startups
- Grant budgeting and projections. We help you prepare and manage detailed budgets and projections for both your grant projects and your overall business.
- Accounting system setup and maintenance. Our team sets up and maintains strong accounting systems and procedures tailored to federal grant compliance.
- Ongoing bookkeeping and reporting. We provide accurate monthly financial statements and grant expenditure reports to keep you compliant and audit-ready.
- Audit preparation and support. When an audit is required, we connect you with specialized auditors and help you prepare all necessary documentation.
- Time tracking implementation. We help you select and implement time-tracking tools to accurately allocate payroll.
- R&D Tax Credit optimization. Many startups eligible for NIH, NSF, or SBIR grants also qualify for valuable R&D tax credits. Note that expenses that are covered by grant funds – such as approved direct or indirect costs – cannot also be claimed for R&D tax credits, as tax law prohibits “double-dipping” on the same expenditure. However, startups that receive research grants may still qualify for R&D tax credits for activities that aren’t considered grant-funded research. Visit our R&D tax calculator to see how much you could save.
Focus on Innovation and Let Us Handle Compliance
Working with a startup accounting firm like Kruze Consulting means you can stay focused on running your company while we handle the complexities of grant accounting and compliance. Our experienced accountants make sure your accounting system is strong, your records are audit-ready, and your projections are solid – setting you up for continued success. Contact Kruze Consulting today to learn how our NIH, NSF, and SBIR accounting services can help your startup maximize funding and minimize compliance headaches.
