Accounting touches everything in a business, and this is no less true in the construction industry. Estimating, sales, payroll, purchase orders, mechanics lien rights–all of it affects the books.
In fact, construction has a unique relationship to accounting. When a project delays, a change order is approved or a payment is late (a common occurrence), it affects a firm’s accounting. Basic accounting functions such as matching revenues and expenses are muddied by the complex nature of multi-party construction projects. The IRS even imposes rules that inhibit certain construction firms from using specific types of accounting methods. It seems the construction industry is plagued with unique payment, finance and accounting obstacles.
These exceptions make it all the more important to work with accounting software that understands and respects the specifics of construction. Most accounting software is one-size-fits-all, or one-size-fits-most. The problem is, construction doesn’t fall into that “most” category. what options exist for businesses looking for an accounting solution?
Three Types of Accounting Software
The market offers a number of options, which can be divided into four categories.
- Non-accounting software that gets used for accounting. This is the least preferable option. The most common solution in this category is Microsoft Excel®. Dependence on spreadsheets is common in many industries and often creates redundant busywork, such as copying and pasting data, that would not be required with more advanced, relevant software. Using Excel for accounting may feel like trying to fit a square peg in a round hole.
- Point solutions. This category is split in usefulness. Some solutions are too generic to be used for construction, while others, such as Quickbooks®, enable construction businesses to tailor the software to their needs. When considering point accounting software, it’s important to look for signs that the solution will adapt to the needs of a construction firm. At the very least, marketing materials should indicate an understanding of the construction industry. Better than that are features within the software, or integrations with other software, that offer customizations.
- End-to-end solutions. These end-to-end horizontal construction software packages include tools to help with estimating, project management, document management, payroll, accounting and more.
End-to-End vs. Point Solutions
It’s obvious that non-accounting software doesn’t hold up to solutions designed specifically for accounting. So, what wins out between point and end-to-end solutions?
Of course, the answer depends on the business, current software suite and needs. End-to-end solutions seem more valuable than point solutions at a glance, especially when they offer accounting, estimating and payroll. But what if the company doesn’t really need it all? Most end-to-end solutions are all or nothing, which presents a number of problems.
The first is cost. It’s difficult, if not impossible, to buy only a portion of an end-to-end solution. Imagine the fictitious company Superior Supply needs accounting software. Superior Supply likes the accounting feature of an end-to-end solution. It doesn’t need the payroll, estimating or document management features. Unfortunately, Superior Supply is probably going to pay for those features because they can’t be cleaved off from the product. They’re included and built into the pricing structure.
Or, more likely, Superior Supply decides to go all-in on the end-to-end software, embracing most of its features and dropping Superior Supply’s existing point solutions. This exposes the other major problem with end-to-end solutions: They force customers to use what are often sub-par features.
Consider the following from a post by Workato, an app integration platform: “Companies like Oracle and SAP promoted this same strategy to its customer base years ago, encouraging them to buy all of their programs from a single vendor… Not only does this solution limit your choices when it comes to choosing the best software… but it is not a practical or cost-effective solution for people already using their choice of apps.”
As Workato explains, end-to-end solutions usually do not offer the best features because they are spread thin (building products with many different functions), whereas point solutions do one thing and do it well.
The Benefits of Point-to-Point Integrations
Imagine having the best software for every use. The best accounting software, the best CRM, the best estimating tool and so on. The problem? If they don’t talk to each other, users waste time copy and pasting data from one tool to another, which quickly becomes more trouble than it’s worth.
But what if these tools could seamlessly talk to each other? They can, and this technology isn’t new. Web application programming interfaces (APIs) came into being as early as the year 2000 and are almost second nature in today’s digital environment. More and more, APIs are connecting software that serves the construction industry. PlanGrid, a leader in mobile construction management software, has taken great strides to integrate its blueprint technology with other solutions. Quickbooks has an app store listing more than 100 apps that integrate with Quickbooks’ accounting software. And zlien has developed an API that enables users to connect their lien waiver exchange functionality to other software. These are just a few examples of existing integrations that benefit the construction industry.
Recent news indicates increased adoption of technology by construction firms, which for years have lagged behind other industries. This is a win for everybody. New technology means easier, faster processes, and the more that construction companies can get complicated business processes out of the way and focus on communication and relationships, the more the industry as a whole will grow.