Choosing the right accounting software is essential to meet the complex demands of construction. Unlike generic accounting tools, construction accounting software is purpose-built to manage the industry’s challenges—where cash flow is dynamic, project timelines fluctuate, and each job presents distinct requirements. Generic accounting products fall short in addressing these realities, making it important to seek products purpose-built for the construction industry.
Having the right accounting software can make the difference between running a profitable business, and struggling to keep up. That said, not all accounting solutions are made equal. To help you separate the wheat from the chaff, here are the most essential features to look out for when choosing a construction accounting solution.
📽️ Watch the video for the 5 must-have features in your accounting software.
Key Takeaways
- Construction accounting goes well beyond the scope of traditional business accounting - and generic platforms like QuickBooks don’t have the tools contractors need to stay on top of their data.
- A good construction accounting software will include functionality for job costing, WIP reporting, retainage tracking, and other construction-specific concepts.
- A good rule of thumb when looking for construction software is to look for products built by contractors who understand the industry.
1. Job Costing
Construction is job-specific, and every job is different. From an accounting sense, this means that every job needs to be treated as its own profit center, with its own profit and loss statement. This way, you can measure actual costs vs. estimated costs and make sure your gross profit margins stay on target.
Most accounting software doesn’t include job costing, forcing contractors to either track costs manually or spend hours figuring out third-party integrations that offer more headaches than help. A good construction accounting software should allow you to:
- Set up job budgets automatically
- Easily track actual costs against estimated costs
- Automate tedious job costing tasks
- Get the insights and data you need to improve profitability over time
Instead of being at the mercy of your costs, these tools let you gain full control over your profitability and address problems before it’s too late.
2. WIP Reporting
Construction contracts can take months or even years to complete, which means you need to have eyes on your financial performance as the progress is being built - not after the fact. To make sure you’re not missing anything or underbilling, you need the ability to bill progressively as work gets done. This is where WIP reporting comes in, and it’s essential that your accounting system supports it.
You can always track this data manually on an Excel sheet, but a good construction accounting software will do the heavy lifting for you. Along with giving a bird’s eye view of all job costing in one place, WIP reports help you plan ahead and maintain a firmer grip on your cash flow, so you’re never stuck playing catch up.
3. Support for Cost Codes and Cost Types
Generic accounting systems may be great products, but they’re just not designed with contractors in mind. Cost codes and cost types are a great example. Most systems require confusing workarounds with third-party integrations just to be able to use them.
The problem is, cost codes and cost types aren’t something you should have to wait on. A good construction accounting solution will allow you to plug and play right out of the box, no workarounds needed. And as your projects get larger, you’ll need a way to track their performance at a more granular level than income and revenue. Cost codes and cost types give you that granularity, and much more.
4. Retainage Tracking
Retainage may be a common part of working in construction, but it can absolutely eat your lunch if you don’t carefully manage it. It’s tough to do this though without retainage tracking being built into your accounting system. If retainage isn’t being applied to the correct retainage accounts on your balance sheet, you risk over or understating your books - and you risk losing track of what you’re owed.
Your construction accounting system should be able to simplify retainage tracking on accounts receivables and payables, so you never have to worry about missing something. It should also make it easy to:
- Account for retainage holdback on both prime and subcontracts
- Create retainage invoices against receivables owed
- Fastrack reporting on retainage payables you owe
5. Change Orders
Nothing in construction can make or break your company’s profitability quite like change orders can. You need a way to easily create and track them in your construction accounting system, so you don’t have to rely on risky handshake agreements. Submitting a formalized change order is much more reliable, both from a communications and financial standpoint.
Your accounting system should be able to create change order proposals that include:
- The change order number
- A detailed scope of work
- The cost of the scope change
- A detailed outline of the project’s adjusted timeline
- The new contract price
- A place for both parties to sign off
With clear documentation, you can ensure everyone is in agreement before you begin work.
With construction-specific accounting tools like these, you can take control of your cash flow, make better plans, and build more confidently. But before you go, there’s one more feature you need that you might not have even realized was possible.
Bonus: Construction Management Software Integration
They say collaboration is key, and that’s especially true when it comes to your construction tech stack. Imagine the time you could save if your accounting platform could work together with your favorite construction management software. This isn’t something most accounting systems offer, and it’s not something many contractors even know is possible. At CrewCost though, we knew it’d be a game changer for contractors, so we made it happen. Our platform can easily integrate into your favorite CRM, so your field and office teams can bridge costly communication gaps and collaborate on a more meaningful level.
Wrapping Up
Your business isn’t like the other mom-and-pop shops on Main Street, so why keep trying to squeeze it into the same box? You deserve an out-of-the-box accounting solution tailor-made for your company’s unique needs - not one that limits your growth potential.
Ready to see what can happen when you use an accounting platform built by contractors for contractors? Try CrewCost free for 30 days and take control of your profitability today.