You know you need a better accounting system for your construction business, but woof, what an endeavor, right? Software shopping can be time-consuming and overwhelming. Perhaps that’s why most subcontractors use the same accounting tools far longer than they should.
But, the benefits (think: efficiency, visibility, accuracy, etc.) to upgrading make the change worth it. Plus, we’re here to help make shopping for new construction accounting software straightforward and speedy. So, before you jump to scheduling demos (there are too many tools out there to make this the first step!), peruse this guide first.
Here, we’ll walk you through some important basics to help you choose the best accounting system for your construction business. Specifically, we’ll cover:
- Signs you need better accounting software
- Must-have capabilities in a new accounting system
- How to get the most out of your accounting software
- Vendor Q&A checklist
- 10 construction accounting systems for your shortlist
6 Signs You Need Better Accounting Software
Construction accounting is challenging, even with the right software. Project-based tracking, varying retainage amounts, and irregular cash flow add levels of complication that other industries simply don’t deal with. Without the proper tools, managing finances for a subcontractor can be a nightmare.
Here are six signs that your construction company needs better accounting software.
- Lack of use: Even though you have an accounting system, you're still relying on paper and spreadsheets. This mainly happens for two reasons: 1.) Your accounting team was never properly onboarded and trained on your accounting software, or (and more commonly) 2.) the software has limitations that force your team to use manual, offline processes.
- Legacy solution: You're on a legacy version of a system that's no longer supported. Or the tool you’re using was acquired by another software system, and the acquiring company is forcing users to upgrade, switch, or deal with an unjustified price hike.
- Significant growth: Your company has reached a stage or velocity of growth where Quickbooks is no longer cutting it. It’s time for a more sophisticated, construction-specific accounting tool.
- Too much tool: Conversely, you and your team could be learning that your existing accounting system is far too heavy for your company's workflows. You’ve realized you’re paying for a lot of bells and whistles you’re not using, and you want to scale back.
- Lack of visibility into project profit margins and costs: Profit margin slippage is bad enough, but when you don’t understand the cause (is it because of rising material costs, inefficient labor, poor cost tracking, or a combination of everything?) it’s downright frustrating. If you’re also dealing with inaccurate ledgers of actual costs and the inability to see forecasted, committed, and pending, then you’re likely two-fisting Pepto Bismol and Tylenol. Your accounting software should provide the visibility necessary to anticipate cash flow issues and take corrective actions.
- Reporting takes forever: The idea of your boss walking in and asking you to send them a gross profit report from last quarter’s projects makes you want to cry. You’re aggravated about how excruciatingly long it takes to run a query, or you’re hustling to produce something that requires you to use an instruction manual. Lastly, you’ve shelled out an arm and a leg for custom-built reporting, but now you have to painfully rely on outside consultants to maintain the system. If any of these scenarios sound familiar, you deserve a better accounting system. A reporting dashboard that lets you grab ready-to-go, visual reports with a couple of clicks will change your life.
Must-Have Capabilities in a New Accounting System
When you start researching construction accounting software, you’ll quickly see that they range from simple billing and payment tools to robust systems that include features like job costing and payroll, to full-on ERP platforms with beaucoup bells and whistles.
Common construction accounting software capabilities include:
Accounts Payable (A/P)
All A/P functionality will include things like invoice management, payment processing, and vendor management. A good system will let you automate workflow and approval processes.
Accounts Receivable (A/R)
Even with the best accounting software, construction A/R is still a bear. Look for a tool that tracks billings across clients, generates invoices, provides standard AIA billing forms, and offers an audit trail. Note that most accounting software (even ones built for construction) cannot fully accommodate the A/R process from a subcontractor perspective. They cannot generate all of the custom forms GCs and owners require nor can they handle lower-tier lien waivers, which would enable speedy pay app revisions. Thus, regardless of which accounting tool you choose, you’ll also want to explore a subcontractor-specific construction billing tool designed to handle the entire payment application workflow.
Financial Reporting and Analysis
Reporting capabilities can range from basic balance sheets to complex profitability analysis. At minimum, you want a tool that can run income statements, gross profit reports, cash flow statements, aged A/R reports, budget variances, and labor productivity.
Choosing accounting software with job costing capabilities will go a long way toward protecting profitability. Project managers should be able to log in from anywhere to track costs associated with labor, materials, and equipment.
Cash Flow Management
Because it takes so long to get paid in construction, it’s critical to proactively manage your cash flow so your company doesn’t run out of money. Some construction accounting software boast that they solve this, but because most systems can’t handle the subcontractor’s precise billing workflow, we recommend going with an accounting software that integrates with Siteline, so you unlock the most accurate and complete view into your cash flow.
Payroll and Timekeeping
If you want to use your accounting software to manage payroll, it needs to have capabilities like timecard entry and processing, prevailing wage management, and payroll reporting.
How to Get the Most Out of Your Accounting Software
Know What You Need
Before you spend money on any piece of software, you should start by understanding exactly what you need. Do you need to be able to handle inter-company billing? Do you need to accommodate a nuanced payroll process? Make a list of must-haves and nice-to-haves, and make sure to get input on the list from every team who may use the software.
Understand What You Already Have
Also, take note of what tools you already have. For instance, if you already have a separate payroll system, this won’t be a requirement for your new platform.
Prioritize Solving The Biggest Headaches
Know your biggest challenges and prioritize solving them first. If you’re struggling with cash flow, make sure you choose software that can improve cash flow management. If you’re losing hours each month pulling reports, look for an option with pre-built, customizable reporting templates.
Choose an accounting software that’s built for construction. Bonus points if it’s specifically tailored to the needs of subcontractors.
Understand Your Integration Needs
Pick an accounting tool that plays well with your other systems—and make sure you know which other systems your accounting software actually needs to play with—so your data can flow seamlessly back and forth. Some connection points to think about include your CRM, bid management software, pay app management tool, and payroll platform (if that’s not baked in).
Look for Innovation
Your company and needs are always evolving. It’s important to choose a vendor that covers your requirements today while continuing to innovate their software. When you demo different systems, ask about their product roadmap and how often they roll out new features and enhancements. Ask to review their most recent product announcements and communications.
There’s nothing more frustrating than a system that always crashes. Your accounting software needs to be reliable. Ask providers what their average annual downtime is and how they handle unexpected downtime. The common availability standard is 99.999%. Don’t accept anything less than 99%.
Seek Stellar Support
Get a rundown of what customer support includes. Is there a phone number you can call? Is it only email? What’s their response time? Ask for their service level agreement and make sure there’s no nickel-and-diming when it comes to getting help.
Don’t Underestimate the Importance of Security
Data breaches in the construction industry increased by 800% from 2019 to 2020. When you consider the vast amount of financial data your accounting system holds, it’s critical that your software is built with security in mind. Make sure you understand how your selected provider approaches security, how they handle data, and what vulnerabilities their software has.
Select a software that’s easy to get up and running. Avoid options with hefty implementation fees and long rollout timelines. In an ideal world, you want to get value from your new software as soon as possible. Ask them for customer examples of subcontractors like you—how long did it take for those users to implement, onboard, and successfully use the product?
Set a Budget
Cost is always a factor. Annual subscription fees for accounting software can range from a few thousand dollars to tens of thousands. Make sure you’re not paying for a bunch of features you don’t need. Even if its robust capabilities justify the cost, it doesn’t make sense to pay for features you can’t take advantage of. Furthermore, find out if there will be any additional costs in the future. Ask what could potentially impact the cost of the product come renewal time.
Understand the Subscription Tiers
Most software providers have multiple subscription tiers. Basic, Professional, and Enterprise are some of the most common levels. One way to help control costs is by making sure you choose the subscription type that best fits your needs. Professional-level subscriptions are enough for most companies. Typically, only large and enterprise construction companies need enterprise-level solutions. So, if there’s that one feature enticing you toward the premium package, ask yourself if it’s really going to add enough value to justify the cost.
Vendor Q&A Checklist
It’s important to be prepared when hopping onto a demo or sales call. We encourage you to build a list of questions to ask your sales rep. Below are a few to consider.
- Does the price cover all features?
- How many users are included in our subscription?
- Do integrations cost extra? If so, how much?
- What’s the cost of implementation and onboarding?
- Is routine customer support an added cost?
- Are there any tiered costs?
- Does the pricing cover unlimited invoices, reports, etc.? Or are there usage caps?
- What does your onboarding and implementation plan look like?
- How long does it take to get up and running with software?
- What are the typical implementation steps?
- How much time should we allocate to onboarding?
- How do you ensure we adhere to the set onboarding and implementation timeline?
- How do you measure the success of your customers’ onboarding?
- What other resources do we need to implement your software?
- Do you offer ongoing training?
- Is your software tailored to subcontractors’ accounting processes?
- Can we connect your accounting software with our CRM? Our bid management system? What other tools do you integrate with?
- What accounting processes can we automate with your software?
- Does your system offer mobile access?
- How do field and project managers typically use the system? Do you have permission levels?
This list only scratches the surface. Brainstorm questions with your team that will address your company’s unique needs. You can never ask too many questions. Choosing a construction accounting software is a big decision; be thorough in your due diligence.
10 Construction Accounting Software to Add to Your Shortlist
With nearly 100 construction accounting tools on the market, researching all the options isn’t really feasible for most people. So we put together a shortlist of the best construction accounting software for subcontractors. It’s a good place to start.
Some of the options on this list are ERPs so they may be more than what you need. Others are straightforward construction accounting software that cover all the basics.
- Sage 300 Construction and Real Estate (CRE)
- Sage 100 Contractor
- Viewpoint Vista
- Viewpoint Spectrum
- Foundation Software
- Quickbooks for Construction
- Jonas Premier Construction Software
You can read our take on why these are the best construction accounting software here.
A Last Note About Construction Accounting Software
Even though accounting systems can do a lot, they can’t do everything. There are some great specialized tools designed to fill the gaps.
For instance, accounting software simply isn’t built to manage all the paperwork involved in the pay apps process. A tool like Siteline, on the other hand, is specifically designed for generating, submitting, and tracking pay apps. It accounts for anything that could delay payment like lien waivers and compliance requirements. Trade contractors use it to get paid an average of three weeks faster and speed up the billing workflow by 80%—something accounting software alone can’t do.
If you’re curious about how Siteline works with the accounting software you wind up choosing, we’re happy to talk shop.