My construction company hasn’t upgraded its accounting software in a while — and it shows. We’ve lost a few invoices, had a couple of payroll delays, and let’s not even get into filing our taxes. I know we need to do better, but I don’t want to overspend on system features we’ll never use. Which upgrades should I focus on?
Construction accounting is unique and complex. Each of your projects serves as an individual profit center with its own revenue, expenses and payroll. When looking to upgrade, focus on industry-specific features such as:
Job-cost tracking. Contractors need to track revenue and expenses by projects, cost codes, 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 costs against estimated costs to determine which jobs are generating positive cash flows and where costs need to be controlled.
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 time entry including electronic timekeeping and include features to support certified payroll for federal, state and local agencies, as well as, Equal Employment Opportunity Act compliance, among others. It should also process multi-state, multi-locality and multi-job processing. All payroll data should flow into the software’s general ledger and job-costing modules. One last consideration is whether the software company offers a payroll service that imports the data directly from the accounting system.
Standardized billing. Construction-specific billing methods include service, unit price, time and material, customized percentage of completion, and American Institute of Architects billing. Users should also 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, as well as, prevents overbilling on committed costs.
Stress-free general ledger and job reports. Your accounting software should be able to generate the full range of reports that contractors need to make informed business decisions. Financial reports – balance sheet, income statement, cash flows, WIP reports, and job cost reports by individual job should all be readily produced without any manual manipulation.
Strong vendor support. Look for a vendor that not only provides 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. Invest in training, it will pay off double in the long run.
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.
Making a transition to new accounting software is not about bells and whistles, it’s about having the right tools at your company’s disposal, which enable continued growth and success. Taking the time to analyze your needs and wants beforehand will set you up for a successful and worthwhile software conversion. Contact your VonLehman advisor for more information.