Best Construction Accounting Software

What is Construction Accounting Software?

Why Use Construction Accounting Software?

Who Uses Construction Accounting Software?

Kinds of Construction Accounting Software

The kinds of projects that construction firms and contractors work on as well as any specialty trades that are contracted on projects determine which construction accounting solutions can match those needs. The size of construction companies also play a role in the kind of construction accounting software that is sought out by businesses. While more and more construction accounting systems (in addition to other types of construction software) are migrating to the cloud—to better fit the on-the-go and on-the-site realities of a construction professional—some solutions are still offered as on-premise solutions. One more thing of note: services companies do exist to streamline the training and consulting, and implementation and integration processes of deploying construction accounting software. The construction industry is a legacy one and while cloud-based, automated solutions have emerged to help modernize construction companies, it’s not easy for such companies to pivot. Service providers have emerged to bridge that gap, providing professionals with human resources that ease the burden of deploying and integrating brand new systems.

Construction Accounting Software Features

Contractors, construction project managers, and construction accountants leverage construction accounting software to track the financial data of each project they manage. Construction accounting software provides construction companies an industry-specific financial management solution that efficiently handles job costing in addition to general ledger and payroll functionalities. The following features are core accounting modules that can be found in any construction accounting solution:

Construction payroll — Payroll is a necessary component of effectively managing contractors and construction workers. Construction accounting software ensures that a company’s payroll complies with regulations as set by federal and state agencies, equal employee opportunity (EEO) minority compliance, multi-state and multi-locality, automated fringes, and unions.

Construction billing and procurement — Billing is another important element that construction businesses must accurately record and track. Construction billing functionality from a construction accounting solution has to be able to generate and track invoices for time and materials, provide full visibility into bookkeeping, track both estimated and actual job costs, and generate standardized American Institute of Architects (AIA) billing forms. Some construction accounting solutions also integrate equipment management functionality, which enables the tracking of any physical assets or equipments borrowed to comply with IRS regulations.

General ledger — Effective construction accounting software provides an easy way to generate and manage general ledgers as well as any relevant financial reports that can help make informed business decisions.

Project accounting — Project accounting enables project managers and construction accountants to track revenue and costs that are allocated to a construction project. Job reports can be generated to help businesses understand whether a project is on or off track. Those job reports can include anything from over or under billing, estimated versus actual costs and production tracking, and cash flow analysis.

Integration or compatibility with other construction systems — While construction accounting software can exist and work on its own, it depends on the size of a construction company or the kinds of projects the company contracts. Software that is built to integrate with other construction solutions helps streamline all workflows and reduce any gaps in communication or handoffs.

Forecasting — Construction accounting software that records and stores data and financial results effectively creates a historical record of job costs and trends. That historical record can be leveraged to better forecast and predict similar projects in the future. This helps construction companies maintain and ensure profitability of future projects.

Trends Related to Construction Accounting Software

Construction accounting software is just one more system that helps construction companies ensure profitability, facilitate confidence from stakeholders, keep a better eye on costs and finances, and remain competitive as construction companies bid against others during the prequalification stage. Construction accounting software is also industry specific, which reassures construction companies and accountants that they won’t need to exert quite as much time on important functions like compliance and audit tracking.

Many of the trends that impact the construction accounting software market revolve around the types of projects that are demanding the attention of construction firms; more attention is being spent on how construction systems in general can better align and communicate with each other. For example, infrastructure and state highway construction are projects that are impacted by funding and political impact; the need for innovation within construction accounting solutions to compensate for a windfall of worker supply or the calculation of unique building materials are far less important than projects such as solar and power construction.

The entire construction industry is realizing the need to leverage advanced technologies (like building information modeling collaboration and cloud-based solutions) which has increased the development of GPS or drone technology to improve back-office, jobsite, and project-specific operations. Construction accounting software vendors are recognizing the positive impact that comes with providing streamlined integration with other types of construction software. Any progress and development made on the construction accounting software front won’t mean much if that software cannot share cost or job information with, for example, a construction project management or construction enterprise resource planning (ERP) solution.

Potential Issues with Construction Accounting Software

Size of company — The needs and requirements of a smaller construction company are not the same as the ones for a larger construction company. Some construction accounting solutions are more suited for a smaller business that take on less high tech projects; the same goes for solutions that are more suited for larger businesses that take on projects like warehousing and distribution centers for tech giants. Buyers must be able to suss out which accounting software will make the jobs of their accounting team (or person) easier.

Vendor support— Vendor support is crucial to ensuring that the deployed construction accounting solutions make good on the company’s investment. Regardless of the immediate, short-term benefits that a construction accounting system may bring to a construction company, if sustained vendor support (for both long-term support and initial training and integration support) isn’t provided, then construction companies will be left with an expensive, sophisticated system that can be just as arduous and ineffective as their previous legacy systems.

Communication and collaboration — If the database that a construction accounting solution provides or contributes to isn’t centralized, then the number and types of reports generated serves no purpose. If the construction accounting software doesn’t easily integrate with other existing construction systems, then the software cannot be as effective as advertised. Buyers need to ask questions about integrations and user access levels when researching appropriate construction accounting software to get the most out of their investment.

Software and Services Related to Construction Accounting Software

Construction accounting software is utilized throughout the entire lifecycle of a construction project. It keeps companies and contractors accountable for costs on a jobsite and with stakeholders. The software can be used in tandem with other construction-specific solutions:

Construction project management — Construction project management software enables project managers, stakeholders, and contractors stay on the same page as a project progresses. Construction project management software streamlines collaboration and communication, enables real-time reporting and documentation of jobsite activity, and eases the dissemination and tracking of assignments and tasks. When construction project management software is used alongside construction accounting software, the two solutions allow construction companies to reduce inefficiencies, ensure nothing falls through the cracks, and create a historical record of all activities.

Construction estimating — Construction estimating software is utilized more in the pre-construction phase of a construction project. Project managers depend on construction estimating software to craft and deliver cost and bid estimates prior to the start of a construction project. They will then turn to those generated estimates throughout the duration of a project to determine where cost is over or underspending as jobsite activity commences.

Project cost management — Project cost management software tracks and reports on the profitability of big projects like commercial buildings, plants, warehouses, and building portfolios. Project managers use project cost management software to ensure that their spend does not exceed their budgets and that their project remains profitable. Construction accountants can use project cost management software to monitor the individual and overall costs of construction projects within their business’ portfolio as well as keep track of both human and physical resources used during projects.

Bid management — Bid management software enables the creation and sharing of bids, request for proposals (RFPs), and requests to tenders (RTTs), which are crucial to the hiring and management of contractors and physical resources. Construction accountants and project managers can look at the reports generated regarding bids for contractors and resources, to better identify and understand any trends in cost as well as connect spend estimates with actual spend.