Construction accounting is unique because the industry has many specialized processes and working methods. Construction companies earn money by completing a series of projects that are site based, always changing, and which may last for months or years. That means the finances of construction companies are subject to constant change as each new project carries its own requirements and inputs. Construction accounting software can help construction businesses to streamline their financial processes, make informed decisions, and achieve greater efficiency.
For a primer about the unique demands of construction accounting, read our blog.
In our blog we’ll discuss how to identify the needs of your business, key features to look for in construction accounting software, as well as how to evaluate different types of construction accounting software.
Identifying Your Business Needs
Just as there is no one way to complete a construction project, there is no one size fits all construction accounting software solution. To find the right software for your construction business, it’s important to first identify your business needs.
Here are some factors that will influence the type of construction accounting software you purchase:
- Annual revenue
- Number of employees
- Types of projects you typically work on
- Number of customers
- Amount of accounting expertise on your team.
Additionally, certain companies may have specialized needs and requirements for their construction accounting software. For example, a company that builds large projects like community centres and hospitals may seek software with project management capabilities. For other companies like prefab builders, an inventory management feature is a must have. Almost every construction company will need accurate reporting and job costing features.
Before you invest in new construction accounting software you can do a company audit of your current business processes to identify the software features that are essential for your company.
Key Features of Construction Accounting Software
When you are evaluating potential construction accounting software solutions, there are certain features that are essential for construction companies. Here are 6 features you should not overlook when you’re evaluating software choices.
- Job Costing – Job costing is a critical feature of construction accounting software that allows businesses to track the costs associated with each job or project. With job costing, construction companies can accurately estimate the cost of each project, track expenses, and analyze profitability. Keeping an eye on job costs helps businesses to make decisions that will reduce costs and improve profitability.
- Invoicing – Invoicing enables businesses to create and send invoices to clients. Using invoicing software businesses can track billing and payments, create professional-looking invoices, and automate the invoicing process. Invoicing is important because it’s an essential part of keeping cash flow positive and can help reduce errors.
- Payroll – Construction accounting software packages that include payroll allow you to calculate and process employee wages, track employee hours, and generate payroll reports. That means you can maintain compliance with labor laws, reduce errors, and save time on payroll administration.
- Accounts Payable – Accounts payable helps businesses to manage their payments to vendors and suppliers. It helps you track invoices, manage purchase orders, and schedule payments and is essential for effective cash flow management. Your accounts payable software also helps maintain positive relationships with vendors by facilitating timely payments.
- Accounts Receivable – To manage incoming payments from clients, you need reliable accurate accounts receivable. AR helps construction companies track payments, generate invoices, and manage collections to improve cash flow and reduce the risk of unpaid invoices.
- Financial Reporting – You’ll also need to be sure the software can report on your company’s financial performance so you can have an easy to understand view of your financial performance, identify trends, and make informed decisions. Your software should provide reporting that allows you to create balance sheets, income statements, and cash flow statements.
What is the Difference Between Cloud-Based vs. On Premise Construction Accounting Software
Cloud based construction accounting software allows you to store and access information over the internet instead of relying on the information on your company’s server, which is on the premises.
One benefit of using cloud-based software is lowered costs when you offload labor and equipment costs for the management of computing hardware and software. With the cloud, those responsibilities (and headaches) are borne by the software provider.
Cloud computing also allows distributed teams to access project data from any location with an internet connection, which makes it more efficient and enables better communication and collaboration. Because everyone uses the same data, instead of importing and exporting information from various systems, your information is more accurate.
Our blog offers more detail about the benefits and options of cloud based construction software.
Most cloud construction options are priced according to the number of users, the level of functionality, and the level of support in your contract.
Budgeting for Construction Accounting Software
Affordability is a key consideration for most businesses when investing in construction software. Here are some factors that can affect the costs of your software:
- Size of the business: The cost of construction accounting software varies depending on the size of the business. Larger businesses may require more complex software with additional features and functionalities, which leads to higher costs.
- Number of users: The number of users who will be accessing the software can also impact the cost. Many software providers charge per user, so the more users, the higher the cost.
- Features and functionalities: Different construction accounting software packages offer different features and functionalities. Some software may have basic features, while others may have more advanced features that come with a higher price tag.
- Implementation and training: The cost of implementation and training can also impact the overall cost of construction accounting software. Be sure to ask if your software provider provides implementation and training as part of the package, or if there are extra fees for those items. Most software providers also charge ongoing fees for support, upgrades, and maintenance.
Evaluating Construction Accounting Software Providers
Once you have identified your needs and your budget, you’ll want to begin evaluating construction accounting software providers. Here’s a checklist to help you ask the questions to find the best fit for your company.
- Features and functionalities: First consider the software’s features and functionalities. You’ve already performed an audit of the key features you require to run your construction businesses efficiently and productively so you can see if the software provider can deliver on those needs.
- Ease of use: Construction accounting software can be complex, so it’s essential to choose software that offers an intuitive and user-friendly interface. It should be easy to learn and easy to use. This will help reduce the learning curve for employees and enable them to use the software more effectively. If it’s difficult to use, your team may avoid integrating the software or may find workarounds that lead to errors.
- Customization options: Ask the software provider if they offer customization options to meet the unique needs of your company, whether that’s an inventory system for your prefab parts or a way to create custom reports and track key KPIs.
- Integration capabilities: In general, we recommend using all in one construction software, but, if you use other software systems, it’s important to choose a provider that offers integration capabilities so that you can communicate between different systems.
- Customer support: Customer support is critical when it comes to software. Ask about the support level offered by the provider. This is also important if you select a cloud-based option. You’ll want to know about recovery times and what to expect for response times in general.
- Scalability: Growing construction companies may see their needs change over time. Try to choose a provider that can scale their services to meet those changing needs.
- Cost: Finally, cost is an important factor to consider. You should choose a provider that offers a reasonable price point and provides a good return on investment.
Running a construction company is complex, but using construction accounting software can help you manage your business more effectively, make informed decisions, and improve profitability. When you’re looking for the right software for your company, you should first identify how you work and prioritize the features you cannot work without. Make sure you speak with multiple software providers to learn about their features and pricing levels. A cloud-based option may be a good candidate for your company as it will help you save money and distribute project data to the people on your team when they need it.
Affordable, easy to learn, easy to use construction accounting software makes it easier to handle construction specific needs like job costing, purchase orders, and progress reporting.
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