Construction Accounting Software
Construction Accounting Software Buyers Guide
Last updated: February 06, 2023
The flow of money in construction businesses is immensely fast. Which is why companies that don’t rely on effective accounting software end up spending a lot of time and even more money while trying to manually calculate expenses on construction projects. Using error-prone, manual methods to keep track of the mountainous number of financial activities and transactions will only bring harm to your company. A construction accounting software is designed to help you in this regard and can improve your company’s financial management accuracy. Constructors and construction companies can invest in these technology-driven products to stay organized, increase profitability, and be as efficient as possible.
Whether you are looking to invest in a building accounting software for the first time or upgrading your current system, this guide can help you get started. This guide will present a basic framework for selecting and evaluating the best construction accounting software so that you can avoid buyer’s remorse. We will take a data-driven look at the salient features you should consider when purchasing these construction accounting products. The guide will also give you the basic idea about what to look for when approaching software vendors, tips for identifying your needs, strategies for extracting the maximum benefits from your software. Overall, it will help you make a more informed purchase decision.
What you'll find inside:
- Understanding construction accounting software
- Benefits of construction accounting software
- What type of buyer are you?
- Tips on how to identify your needs
- Salient features of a construction accounting software
- Latest trends
- Assessing the expenses
- Potential challenges
- Popular construction estimating software
Understanding Construction Accounting Software
What is construction accounting software? Construction accounting software are designed to help construction professionals keep track of money coming into and out of their business. These technology-driven products are widely used in the construction industry to manage tasks like tracking project-specific finances, monitoring equipment usage, budgeting, collaborating with subcontractors, reporting the percent of a completed job, and payroll. Having access to a robust accounting software for construction will let you optimize your financial management. These systems are typically designed around job costing modules so that accounting staff can allocate job costs by CSI code and job. You don’t need to worry about your construction project’s budget because the accounting functionality of your software allows you to monitor each project's financial status and expense in real-time
Benefits of Construction Software
Some key benefits of implementing building accounting software include, but are not limited to:
- Increased potential client confidence
- Fewer errors and less double entry of data
- Faster and more accurate accounts receivable & payable
- Safer record keeping
- More profitable project control & command
- Instant information access
- Improved visibility
- Simplified the invoice management
- Budget management
What Type of Buyer Are You?
Before you start shortlisting potential construction accounting software vendors for your business, you should understand what type of buyer you are.
Service contractor: Service contractors belong to the buyer category where the buyer looks for a system that combines accounting and field service management. Other than the core accounting functionalities, they require spare parts inventory management, scheduling, service dispatch, and service contract management. These contractors have specific labor-related needs as they self-perform work. A specialized set of vendors offer financial software for service contractors.
Large construction enterprises: Larger construction companies need to consolidate financials for different corporate entities. They also have different units, which perform types of work (e.g., Civil, MEP, GC – all under one parent company). Typically, these firms are looking to modernize by replacing the old legacy software.
Heavy/civil contractors: These contractors have very unique requirements. Their work revolves around unit billing, which means they need a system that is designed to bill this way. Heavy/civil contractors also have substantial requirements around fixed asset accounting, dispatching & tracking work crew, equipment management, and materials management. There is a well-established set of vendors for this market segment as well.
Goal Setting: Areas You Want to Improve
Before you begin to evaluate any building accounting software vendors, it is pivotal that you understand what you are actually looking for from that software. You need to be certain of the current accounting needs of your construction business in order to identify the areas that you want to improve. Once you have figured out your current needs, you need to do the necessary leg-work to find the system that will let you carry out your budgeting and financial management tasks reliably, accurately, and efficiently. After all, you don’t want to end up with a tool that doesn’t work for your problem areas.
Define Your Current Problems Before Seeking a Solution
To ensure successful software selection, it is critical that you highlight the already existing pain points and deficiencies in your current setting. You should evaluate all your financial processes to see where they fall short. Discuss this with your team members who manage these processes on a daily basis; they will quickly be able to tell where the problems lie. This will help you choose the best construction accounting software.
Vendor Shopping: Salient Features
Now that you have determined the construction accounting needs of your business, it’s time for you to start looking for a vendor that closely matches your unique requirements. Evaluate each shortlisted vendor based on how easy they are to use and implement, features including payroll management, budgeting, and level of accounting, cost, knowledge required, as well as other industry-specific functionalities. Also seek out recommendations from peers before you start googling. Consider referrals first and then swiftly make your way through online software review platforms. Once you have picked a few potential vendors, create a list and start digging deeper.
Accounting software for construction offers a variety of different features, depending on the type of your construction business and the functionalities you need from the vendor.
When purchasing construction accounting software for your building projects, be sure it offers the following features:
- General ledger
- Financial reporting
- Accounts payable
- Accounts receivable
- Job costing
- Inventory control
General ledger: This is one of the staples of building accounting software. It helps construction professionals track everything related to expenses and income of the company. You can create income statements and balance sheets. It also maintains all details to help make financial decisions and track profitability.
Job costing: You can use this feature to assign costs to materials, equipment, subcontractors and labor associated with each construction project.
Accounts payable: The accounts payable feature manages expenses from materials, labor, and equipment rentals. It helps construction professionals maintain cash flow so that they can pay bills on time.
Accounts receivable: The accounting software for construction that offers the accounts receivable feature allows you to store details on clients and supports integration with the general ledger. It includes construction invoicing and billing, such as progress billing, time & material, and AIA.
Financial reporting: You can use the financial reporting tool to create custom reports and visualize how your time and money is being utilized for each project. It also helps you analyze the net profit and expenses to find out where you need to improve to increase ROI.
Inventory control: The best accounting software for contractors offers inventory control capabilities for tracking the pricing, items, usage, and purchasing. It allows you to keep a close track of inventory and latest trends so that your team always has access to supplies to keep projects moving forward.
Payroll: You can use the payroll feature to manage wage calculation, tax management, and direct deposit for employee and subcontractors assigned to the project. It also allows you to manage all types of construction payroll.
These are the market trends to understand when evaluating a new accounting and job costing software solutions:
Business intelligence: Construction accounting software systems have come a long way from just simply recording transactions. Now they include advanced business analytics functionalities for providing key insights into the performance of the company, project by project. Constructors should be able to run ad hoc reports and breakdown information from the software to answer critical questions about their business.
Technology modernization: Accounting software for construction that are built on outdated programming languages or proprietary databases often fail to meet companies’ needs for integration, reporting, and data export. This can be a major problem for large construction businesses, but all buyers should carefully evaluate the technological aspect of each product.
Increasing suite breadth: Today most building accounting software vendors continue to expand the breadth of their software through development. They offer an all-inclusive suite of solutions, including project management, estimating, project scheduling, service management, and bid management. Buyers should prefer the systems that come with integrated suites.
Assessing the Expenses
The cost of purchasing construction accounting software varies according to the following factors:
- Number of users supported
- Implementation processes
- Customer support
- Contract terms
For firms that are just looking for construction-specific accounting software and don’t need the full functionality of an enterprise-level software, most products will cost between about $100 and $500 per user per month, depending on the type of features you choose to include. Large construction businesses that need the functionality of an enterprise solution can expect to pay around $1,000 a month.
Most of the issues that surface with new accounting software for construction stem from poor selection and implementation processes. Many contractors see technology as the silver bullet for all their problems and challenges. In reality, even the best accounting package for this industry will not work if you don’t have the combination of the right solution and a well-executed implementation process.
When selecting a new accounting system, construction professionals need to carefully understand their business processes first, and then proceed with the process of finding the software developer. Keep in mind that the software you choose should automate a more effective set of processes and closely map to your current workflows. Moreover, contractors should consider investing in proper training so that new users can realize early benefits from the new accounting software.
The Top Construction Estimating Software
The following integrated construction accounting software systems have positioned themselves as market leaders:
- Acumatica Cloud ERP
- Jonas Enterprise
Choosing What's Best for Your Company
Selecting the best accounting software for your construction business is no easy feat, but it’s better to deal with the process before making million-dollar calculation mistakes. You must exercise all due diligence to avoid locking yourself up in a restrictive contract with a vendor that does not meet your unique financial and budgeting requirements. While the best accounting software for contractors can be somewhat expensive, it’s generally worth it if you utilize even a fraction of its features to examine your financial condition, track expenditures associated with your construction projects, and record the flow of your company’s money.