Construction businesses have to make challenging financial decisions every day, such as which projects to bid on, which financing options to pursue necessary supplies and tools, and what profit margin to establish for each project. The ability to grow and maintain positive cash flow is predicated on an accurate accounting of costs, sales, and other financial data. To effectively manage funds in the face of the construction industry’s specific financial constraints, company leaders need sophisticated accounting systems. This article contains the best construction accounting software you can for to make your construction company grow. We also added some construction accounting certifications to help you grow in this field. Enjoy the ride!
What Is a Construction Accounting?
Costs are typically attributed to individual contracts in construction accounting, which is a subset of project accounting. Each construction project is treated as a unique “job” in the accounting software, and expenses are allocated to it in real time by assigning it a specific job number. Materials and labor make up the bulk of these expenses, with other costs including things like architectural and consulting fees. Construction projects incur a number of additional, indirect costs, such as those associated with supervision, equipment rents, support expenditures, and insurance. Unless approved by the client, construction projects may not include administrative fees.
How to do Construction Accounting
There are some steps you need to follow when it comes to construction accounting. Here are some of the steps:
#1. Start Off On The Right Foot With Your Books
We know that keeping your books in order isn’t exactly at the top of your to-do list in the midst of supervising apprentices and responding to emergency calls for service. You can’t afford to disregard the importance of accounting and bookkeeping. Keeping accurate financial records is essential for any organization since it helps with spending management and informs future decisions. Tasks like keeping track of money flows and processing payroll fall into this category.
#2. Key Expenses Should Be Monitored
Keeping tabs on a company’s outlays can be difficult. Materials and labor both need to be kept tabs on. Without dedicated personal accounts or credit cards, it can be a hassle to track down this type of activity when tax time rolls around. If you haven’t previously done so, you may easily solve this problem by establishing a checking account that is used only for business transactions. This will be helpful in differentiating between groceries and building supplies.
#3. Maintain Daily Records
The most important aspect of construction accounting is maintaining a consistent schedule. Keeping regular records is one of the most basic requirements. If you don’t keep detailed records, monitoring your company’s financial health will be a major hassle. Get organized and stay that way. There are simple apps that make bookkeeping convenient even while you’re away from your desk and working on a project. It’s not just convenient, but it also follows the MTD guidelines. If you keep meticulous records on a daily basis, filing your taxes will be a breeze.
#4. Keep in Mind Tax Due Dates
Everyone finds tax filing time to be a hassle. In order to finish your tax returns without making any mistakes, it is recommended that you set a reminder. Maintaining precise records is crucial for meeting filing deadlines. You won’t have to worry about getting fined by HMRC for a mistake, either.
#5. Keep Track of Your Cash Flow
In construction accounting, you need to proceed with prudence. The expectation is that complex jobs with high costs will also provide high profits. Make sure to send out invoices on a consistent basis, or request payment up in advance for high-priced labor and products.
You should stop working immediately if a client decides not to pay for any reason. The failure of most small construction firms may be traced back to skipping this crucial stage. You may avoid joining that group by keeping a close eye on your financial flow.
Construction Accounting Software
In order to keep track of the company’s cash flow, construction businesses use construction accounting software. When it comes to tracking job-specific expenses and revenues, managing payroll, and billing and procuring customers, construction accounting software goes above and beyond what traditional accounting software offers.
Numerous suppliers provide construction businesses of varying sizes and specializations with suitable accounting software solutions. Simple accounting software, such as QuickBooks, is sufficient for many freelancers and small enterprises whose operations fall into a narrow sector. However, job-specific cost and revenue tracking is typically not a feature of generic accounting software, necessitating manual processes. When it comes to handling finances and generating useful reports about the state of a firm, these workarounds become less effective and efficient as project complexity rises.
On the other hand, accounting software is often an integral part of enterprise resource planning (ERP) systems, which provide a comprehensive answer to various business needs for larger organizations. Accounting, assets, contracts, CRM, payroll, and other business processes may all be managed centrally with the help of ERP solutions for the construction industry. One potential drawback of enterprise resource planning systems is that many of the available alternatives were not developed with the building trade in mind. If your company is in the market for an ERP, one option is to find one that has construction-specific accounting modules like job costing.
Best Construction Accounting Software
The following are some of the best construction accounting software you can opt for:
#1. CMiC
When it comes to managing the finances and books of a construction company, CMiC is unparalleled. CMiC has capabilities in accounting, project management, human resources, and the field to meet the vast majority of requirements for a construction company. To better understand project costs and reduce risks, CMiC compiles all of the company’s data into a centralized database from which users may get a wide range of in-depth analyses. Core accounting features for the construction industry provided by CMiC include budgeting, corporate and project forecasts, the general ledger, accounts payable, and accounts receivable. CMiC’s accounting tools, like its built-in automated controls and risk management capabilities, allow businesses to reduce exposure to lose, tighten their grip on the books, and boost their bottom line. Saving time, ensuring data integrity, and facilitating precise documenting, forecasting, and reporting on financial health, CMiC creates a single consolidated record of past and present financial activities.
CMiC is equipped with powerful capabilities for project management, human capital management, and asset management, in addition to its strong accounting and financial management features. As a result, CMiC is a powerful enterprise product that facilitates project-wide alignment and visibility. In addition, CMiC’s FIELD solution offers a mobile app for communicating project information, papers, and updates from the field to the office.
Pros
- Can be scaled to meet the needs of different-sized businesses
- Available as either a cloud-based or on-premise solution
- Quality customer support and training materials
Cons
- Users report that the product can be slow at times
- Setup and initial training can be time-consuming
#2. Jonas Premier
Jonas Premier is a comprehensive accounting and project management system designed for construction companies of all sizes. The ability to automate retainage payables for subcontractors, develop bespoke payment workflows and approvals, and set up recurring accounts payable (A/P) are just some of its superb accounting capabilities. It also provides robust project accounting capabilities, such as the ability to instantly create RFI documents, track time via a mobile app, and generate task cost reports with drill-down capacity.
Pros
- Lets you drill down into job costing line items
- Handles any billing contract type
- Offers unlimited document storage
- Can track equipment and inventory costs
- Allows you to create, send, and track RFIs
- Manages subcontractor agreements and payments
Cons
- Expensive implementation fees
- Lacks payroll management features
- Lacks a client portal
- Lacks customer relationship management (CRM) features
#3. FOUNDATION
FOUNDATION, founded in 1985, is a pioneer in the construction industry and a leading provider of construction accounting software. It is a comprehensive and adaptable alternative that can serve a wide range of construction activities thanks to its robust features and a large selection of modules for enterprises of all sizes. It includes the standard modules for construction accounting software, such as job costing, payroll, general ledger, AP/AR, and PO/subcontractor administration. FOUNDATION surpasses its competitors by offering supplementary modules for a wide range of construction finance management functions, including but not limited to project management, scheduling, inventory and equipment tracking, document imaging, and more.
Users have a variety of opinions regarding FOUNDATION’s reporting capabilities, with some believing the system’s default reports are inadequate. The recent addition of DataGenie integration, on the other hand, has greatly improved FOUNDATION’s reporting capabilities. DataGenie allows customers to personalize and create their own reports, whereas FOUNDATION just provides a selection of established options. When compared to more complex construction accounting and management software, users find FOUNDATION to be simple to pick up and use. The modules are well-organized and straightforward. However, several users have complained about the software freezing up or crashing, and many updates seem to focus solely on fixing bugs rather than introducing new features.
Pros
- Easier to learn and use than many other leading options
- Mobile app and cloud-based installation available
- Exceptionally helpful and responsive customer service
Cons
- Reporting capabilities are not as strong as some competitors
- Users sometimes encounter glitches, freezing, crashes, etc.
#4. Sage 100 Contractor
You can use the many available formulas, templates, and variables in Sage 100 Contractor to rapidly and precisely generate estimates. Using standard Windows functions like cut, copy, and paste, you can quickly and easily generate quotes. You can import data from other estimates, for example, or copy and paste an estimating grid into an Excel sheet. You can also export estimating notes to documents like purchase orders, change orders, work orders, request for proposals (RFPs), and subcontracts.
Pros
- Uses Windows features to easily create estimates
- Includes remote time tracking by employees and equipment management
- Supports construction-specific billing, such as AIA and time and material
- Has a mobile app that can be used for sending change and dispatch orders
Cons
- Has no client portal
- Lacks mobile accounting features
- Is unable to track employee location
- Has no upfront pricing
#5. QuickBooks for Construction
Although QuickBooks wasn’t made for construction accounting particularly, it does have features useful for the industry that allow it to be used by smaller firms. With industry-specific capabilities including work costing and interfaces with other construction management software, QuickBooks for Construction expands upon the company’s standard QuickBooks offering. QuickBooks is a fantastic alternative for tiny construction enterprises due to its low price and straightforward interface in addition to its basic capabilities. It is a wonderful option for smaller construction companies with fewer staff working on projects with more stable budgets. QuickBooks lacks several of the more complex features of competing construction accounting software, but the product’s QuickBooks for Construction edition does offer a sufficient set of construction-centric tools to be an option for some organizations.
QuickBooks has the bare-bones features you need to handle jobs, invoice clients, and track contracts. The software also provides dashboards for tracking revenue and expenses on individual projects. Time and expense tracking for employees is included, as is simple integration with QuickBooks’s Payroll service (for an extra price). The user-friendly design of QuickBooks is another perk. QuickBooks makes it easy to tailor reports, enter invoices, and link bank accounts for faster financial dealings. QuickBooks simplifies accounting for those who don’t want elaborate financial reporting
Pros
- Affordable pricing for small businesses
- Integrates with construction management software like Corecon and Buildertrend
- User-friendly interface is easy to learn
Cons
- Limited feature set compared to more construction-specific accounting software
- Caps on users make it less appropriate for midsize to large businesses
#6. Sage 300 Construction and Real Estate
Sage 300 CRE is one of the most prominent solutions on the market, serving the complicated financial management demands of medium- to large-sized construction enterprises, with thousands of customers and several decades in the field. When looking for reliable construction accounting software, Sage 300 CRE is among the best options available. Sage 300 CRE stands out from the competition because it provides a comprehensive set of functionality, including high-end accounting tools and reporting for job costing, payroll and HR, and billing and invoicing.
The software is a solid all-around choice for firms looking for a comprehensive software product because it also has tools for estimating, document management, project management, business intelligence, and service management. Many users like Sage 300 CRE’s business intelligence and reporting capabilities. Sage 300 CRE provides users with critical insights about their businesses and specific projects through its more than 1,400 prebuilt report formats and considerable customization options.
Pros
- Long track record in the construction and real estate industries
- Extensive reporting and business intelligence features
- Strong customer service and support offerings
Cons
- The software can be difficult to learn and the UI feels dated compared to newer competitors
- High price, especially for certain features and higher tiers of customer support
- Only available as an on-premise solution
#7. Buildertrend
While Buildertrend isn’t designed to handle all of your accountancy needs on its own, it can sync with services like QuickBooks Online and Xero to provide you access to tools like invoicing and cost monitoring. However, its advantages in the building industry are unparalleled. It’s ideal if you need to store and manage a wide variety of files every day, as all of the plans come with unlimited document, photo, and video storage. Files can be imported, organized into job-specific folders, accessed directly from the mobile app, and shared with clients so that professional connections can be maintained.
The Daily Logs feature is also enhanced by the document management module. You or your team, for instance, can upload files, images, and videos to verify crucial project information when entering a daily log.
Pros
- Offers unlimited file and photo and video storage in all its plans
- Includes a CRM feature
- Has a time clock feature that tracks employees’ locations on a map
- Integrates with QuickBooks or Xero for enhanced accounting features
Cons
- Requires a separate fee for your QuickBooks or Xero subscription
- Cannot manage equipment
- Can’t manage bills and purchase orders in its Essential plan
- Is more expensive than most construction-specific accounting software
Construction Accounting Software vs. ERP
An ERP system is a type of business management software that keeps tabs on a company’s finances, assets, customers, vendors, and employees, among other things. While accounting features may be present in ERPs, this is not usually the primary focus since ERPs are developed to fulfill a wider range of operational requirements. Tools for project management, estimating, bidding, contract administration, scheduling, and other typical business tasks may also be included in construction-specific ERPs.
The financial records and reporting needed by a construction company are typically the only focus of construction accounting software. The aforementioned features are not universal in accounting software. An enterprise resource planning system’s extensive feature set may be overkill for some smaller construction organizations, but it could be invaluable for others.
While most enterprise resource planning (ERP) systems are generic in nature, there are several that are tailored to the unique requirements of the construction sector. You should check ERPs to see if they provide construction-specific accounting modules in addition to other capabilities if you are serious about choosing the best software for financial management in your construction business. If not, you may need to invest in separate construction accounting software to work in tandem with your enterprise resource planning system.
Construction Accounting Certifications
The following are some construction accounting certifications you can go for:
#1. CERTIFIED CONSTRUCTION INDUSTRY FINANCIAL PROFESSIONALS (CCIFP)
CCIFP certification is valid for three years, after which time the holder must recertify. Its purpose is to demonstrate proficiency in a variety of important areas, such as:
- accounting and reporting
- risk management
- taxes
- human resources
- legal
- information technology
- income recognition
#2. CONSTRUCTION FINANCE FUNDAMENTALS FROM THE CORPORATE FINANCE INSTITUTE
The goal of the introductory course titled “Construction Finance Fundamentals” is to familiarize students with the basics of managing the financial aspects of construction projects and businesses. According to the Corporate Finance Institute, students who are interested in a career in real estate construction finance should take their Construction Finance Fundamentals course.
There are a total of 38 classes in the Commercial Banking and Credit Analyst curriculum, one of which is called Construction Finance Fundamentals. Training in construction accounting can be useful in and of itself, but it can also serve as a stepping stone to a career in other areas of corporate finance. It is expected that by the end of the course, students will be able to know:
- how to communicate the distinct phases of real estate development
- different types of construction firms
- due diligence reports and their purpose
#3. CONSTRUCTION ACCOUNTING AND FINANCIAL MANAGEMENT FROM THE UNIVERSITY OF CALIFORNIA, DAVIS
The University of California, Davis, offers a course in construction accounting and financial management. In it, you’ll learn from Joann Hillenbrand, CCIFP, who is also the CFO at Airco Mechanical, Incorporated. Having worked in the field of construction accounting for more than 30 years, Joann teaches students a range of skills, such as:
- contract management
- accounting
- cash management
- financial statement management
- construction accounting fundamentals
- construction risk management fundamentals (including insurance)
What Does an Accountant Do in Construction?
The role of a construction accountant is to oversee and manage the budget for a construction project. Budgeting, cost analysis, and analyzing purchase orders, invoices, and supplier contracts are all part of their remit as construction project planners.
What Skills Do You Need to Be a Construction Accountant?
- Accounts Payable.
- Financial Statements.
- Auditing.
- Financial Analysis.
- QuickBooks.
- Accounts Receivable (AR)
- Bookkeeping.
- Financial Reporting
Final Thoughts
Finding construction accounting software that incorporates integrated construction-specific features, such as job costing, equipment management, and specialized construction invoicing, is crucial because running a construction company is challenging. You can pick from one of the above construction accounting software.
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