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Five Ways Construction Accounting Software Can Improve a Business

Trying to run a business with insufficient accounting software is like trying to build a brick wall with an insufficient amount of mortar. If there isn’t enough mortar to hold the wall together, eventually bricks start to loosen and the wall crumbles.

Here are five ways that great construction accounting software can change a business.

1. AUTOMATIC REPORTING

If users are creating customized reports outside of the accounting system for work–in-progress, construction billing forms, certified payrolls, job costing or labor production analysis, the current accounting system is not meeting the company’s needs. When a system is incapable of providing information the way contractors need to see it, users are forced to re-enter data into separate spreadsheet programs. In effect, they are creating a second set of books that must be continuously updated and maintained with each new transaction, job change, equipment usage and so on.

A robust construction accounting system offers accurate, instant and extensive reporting capabilities. These systems are built on secure databases and are designed to handle millions of records and multiple users, which means that they can produce reports that can be easily shared and accessed. This increases efficiency and ensures everyone is on the same page.

With a good construction accounting program, the following reports should be ready to share instantly:

  • certified payroll;
  • estimated vs. actual cost;
  • backlog;
  • work-in-progress;
  • over/under-billing;
  • gain fade analysis;
  • job general ledge tie out;
  • profit and loss; and
  • balance sheet.
2. SIMPLIFIED CONSTRUCTION PAYROLL

Whether there are 10 employees or 300, payroll activities and the reports derived from payroll information can be complex. Most accounting systems can generate payroll checks/direct deposits and book the costs to the general ledger, but the accounting package should have the sophistication to deal with multiple states and localities, varying pay scales, multiple job classifications, union reporting deductions, withholding and tax reporting, and other construction payroll issues.

Construction accounting software should include the following to automate and streamline the payroll process.

  • Time card entry. A construction accounting system’s payroll module must support many time card styles, as well as methods of delivery. It should also seamlessly integrate with third-party mobile time card applications.
  • Multi-state, multi-locality and multi-job processing. With this feature, contractors will not only save time on payroll tax processing, but also gain a greater understanding of how and where labor and burden costs are being spent on jobs.
  • Job cost and general ledger integration. In order to track and manage job costs effectively, contractors need a system that sends both labor and burden associated with payroll to the general ledger and to job costing.
  • Certified payroll. The inability to produce certified payroll reports could prevent contractors from bidding on government-funded jobs, ultimately narrowing their scope of work. The contractor’s accounting system should be able to instantly produce agency-specific certified payrolls for any payroll period.
  • Payroll reporting. Software should be capable of generating various federal and state payroll tax reports (including year-end W2s), and it should generate on-demand reports such as time card history, detail report by job and accrued time off. The accounting system also should offer construction reports, which eliminate the need for manual preparation of Equal Employment Opportunity reports and other reports for government agencies. These systems include a number of user-defined deductions that allow for instant computation of liability insurance, garnishments, employee loans, 401(k) deductions and more.
3. INTEGRATED JOB COSTING

Information that cannot be retrieved quickly is of little use to decision-makers or project managers who need real-time job cost data. This job costing data is critical to making good decisions on jobs during their life cycles. Because of this, robust reporting is the cornerstone of most good construction accounting programs. Beyond standard reports, these programs typically offer advanced reporting features such as customizable report-writers, complete date sensitivity, and easy data input and export.

Job costing significantly changes the way contractors look at and manage their jobs. It gives decision-makers real-time job data, such as estimated vs. actual or production reporting, so they can get a clear overview of how their jobs are performing.

Four basic components lead to powerful, virtually limitless, job cost reporting.

  • Job cost detail. No matter how complex the job, efficient job costing comes down to how costs are defined and tracked. Users should be able to define any number of phases, cost codes and cost classes so they can report data as precisely as they need it.
  • Reporting flexibility. Good systems provide a multitude of standard reports and make it easy to customize reporting when needed with built-in report writers. These report writers should allow users to create their own drill-downs, equations and what-if scenarios.
  • Date sensitivity. This feature allows any report to be run for any time period, even months or years in the past.
  • A powerful database. How and where data is stored affects reporting capabilities. Data protection and the ability to query via Excel® and other Microsoft® products are huge advantages.
4. STANDARDIZED CONSTRUCTION BILLING

In order to maintain the necessary inflow of cash, contractors must select the billing method best suited for their jobs. The most successful contractors bill and collect according to their contracts, get billings out promptly, never forget about items such as change orders and retention, and rely on their construction accounting software to automate the entire process.

Good construction accounting systems support industry standard billing methods, as well as complete integration with job costing and general ledger. Going further, construction accounting systems should offer users the ability to minimize data entry with default calculations printed on blank forms or directly on pre-printed forms, make adjustments to prior invoices, calculate retainage, define and track sales and use tax, add change order, and update AIA billings automatically with each application. Additionally, integration with other areas of the accounting software will keep the team up to date on the latest invoice and payment status for every contract or change order.

Accounting software should allow for several types of standardized billings, including:

  • AIA billings;
  • time and material billings;
  • unit price billings;
  • customized percentage of completion;
  • service; and
  • lump sum, itemized and other free-form invoices.
5. RELIABLE CUSTOMER SUPPORT

No matter how good a construction accounting system is, or how easy it is to use, there will be times when users will have questions or run into problems. Fast, reliable customer support is especially critical for accounting software because an unnecessary delay in payroll, billing or receivables can affect more than just productivity.

The construction software vendor should be a long-term partner that cares about the contractor’s business and knows the construction industry. A partner like this can be invaluable when dealing with tough construction accounting issues. Six key features that improve the quality of support are:

  • live customer support;
  • a variety of support options;
  • fast response time;
  • product/industry experts on staff;
  • ongoing product updates and enhancements; and
  • ongoing educational opportunities.

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