#1: Tax return does not reconcile with your Quickbooks Income Statement

First of all, an 8(a) application will commonly be rejected if your income from your tax return does not reconcile with your Quickbooks Income Statement and/or you did not prepare your financial documents in accordance with GAAP. 

#2: Tax return does not match the NAICS code

The second most common reason for an 8(a) application to be rejected is because the activity code used on your tax return does not match the NAICS code in Sam.gov or the SBA DSBS system. It’s important to make sure you’re using the correct NAICS code for your business and using it consistently. 

#3: Equity section won't line up perfectly

The third most common reason for an 8(a) application to be rejected is because the Equity section of your balance sheet does not reconcile from year to year. This aspect of your financials is sometimes put on the back burner, but it should be reviewed to ensure that the Equity section lines up perfectly with GAAP from year to year.

#4: Missing an updated Certificate of Good Standing

The fourth most common reason for an 8(a) application to be rejected is because you’re missing an updated Certificate of Good Standing. This certificate must be from the state in which your firm is authorized to do business and it must be kept current. 

#5: Outdated financial statements

The fifth most common reason for an 8(a) application to be rejected is that your financial statements aren’t up to date. These documents don’t have to be exact down to the day, but they should reflect your financials from the end of your most recent quarter. The ability to provide these up-to-date financials demonstrates to the SBA that your firm is a well-oiled machine capable of handling federal government prime contracts. 

#6:  Follow the SBA’s documentation checklist

If you choose to submit your 8(a) application on your own without the help of an 8(a) small business consultant, make sure you go through the SBA’s documentation checklist, which is found on their website and included with your application. If you’re unfamiliar with some of the documents on the list, you can consult with us to make sure your application is complete. 

#7: “Opening Balance Equity”

Whether you’re wondering what went wrong with your application or just preparing to submit it, we hope this information helps you!

The seventh and final common reason an 8(a) application is rejected is because your balance sheet has an “Opening Balance Equity” account showing. This kind of account is automatically set up by Quickbooks and should only be temporary with a balance of zero, therefore it should not show up on your balance sheet. 

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If you want to review your 8(a) application for thoroughness and accuracy before submitting, contact The W2 Group today!