Construction accounting is unique and complex. Each of your projects serves as an individual profit center with its own revenue, expenses and payroll. This means contractors shouldn’t use an off-the-shelf system. When looking to upgrade, focus on industry-specific features such as:
Job-cost tracking. Contractors need to track expenses according to projects, cost codes, classes, and job phases. What separates construction-specific accounting systems from general-purpose ones is that they use job-costing modules to track costs and revenues by project. This measures actual vs. estimated costs to determine which jobs are generating positive cash flows and where costs need to be controlled. One function to upgrade is communication among the various modules to ensure everything is updating seamlessly across the board.
Simplified payroll. Prevailing wage rates, unions, multistate deductions and government compliance are just a few challenging aspects of construction payrolls. Your accounting software should support various forms of timecard entry and include features such as payroll reporting; certified payroll for federal, state and local agencies; Equal Employment Opportunity Act compliance; automated fringes; and multistate, multilocality and multi-job processing. It’s also important that your payroll data flow into the software’s general ledger and job-costing modules.
Standardized billing. Construction-specific billing methods include service, unit price, time and material, customized percentage of completion, and American Institute of Architects billing. Users also should be able to use lump-sum, itemized and free-form invoices.
Purchasing and subcontract controls. This feature determines what’s been invoiced and what committed costs remain outstanding. It also prevents overbilling on committed costs.
Stress-free general ledger and job reports. From income statements and cash-flow analysis (by job) to over/underbillings, production and estimated vs. actual costs, contractors should generate reports rather than spreadsheets. Your software shouldn’t force you to manually create reports from spreadsheets or perform additional entry into a job journal once an invoice or timecard has been submitted.
Strong vendor support. Look for a vendor that provides not only initial training, but also continuing education along with the requisite patches and updates. Check references to find one with fast response times and priority support for work-stoppage issues.
Compatibility with other systems. Ensure the solution can integrate with other software, such as your equipment usage system. You want to be able to share information with ease — particularly with your CPA, who can help you select the ideal accounting software for your construction company’s size and specialty.
We welcome the opportunity to put our construction industry expertise to work for you. To learn more about how our firm can help advance your success, please contact Dave Wolfenden at (302) 254-8240.