Construction Accounting Software Features

Written by: Kelsey Hainley and John Meibers

Construction projects come with unique financial challenges and managing the books efficiently is crucial for strong financial health. This is where accounting software for construction contractors becomes an indispensable tool. In this article, we'll delve into the world of construction accounting software, exploring its types, key features and the myriad of benefits it offers to a construction business.

In This Article:

• What is Construction Accounting Software?
• Types of Construction Accounting Software
• Key Features of Construction Accounting Software
• Benefits of Using Construction Accounting Software
• How Deltek Supports the Construction Industry 

Construction accounting software is a specialized tool designed to meet the accounting needs of construction companies. It goes beyond traditional accounting software, offering features tailored to the complexities of construction projects.

There are many different types of construction accounting software programs out there. Some focus on one specific area of construction management (such as estimating), while others cover all aspects of the industry.

The most popular types of construction accounting software include:

Job Cost Accounting Software

With today's technology, companies have access to powerful job costing software that can help them track their expenses and profits through accurate financial reports. Job costing software allows businesses to allocate actual costs to specific jobs or projects, giving them real-time visibility into their operations and financials. The software can also be used to monitor project progress and make entries and adjustments, decreasing the amount of manual processes and human errors.

Job costing software is an invaluable tool for businesses involved in manufacturing, construction and other projects, providing centralized cost control so that all operations are as efficient and profitable as possible. This software allows contractors to assign costs to individual categories, giving them improved visibility over their finances. This enhanced visibility enables businesses to track expenses more accurately and improve their cash flow, invoice management and job profitability.

Revenue Recognition Software

Construction accounting is complex because it deals with the timing of recognizing revenue. In short, revenue recognition refers to recording revenue earned during a period. Revenue is recorded on either a cash or an accrual basis. Under a cash basis, revenue is recognized immediately upon receipt. Under an accrual basis, revenue recognition occurs over the life of the related contracts.

Cash-based accounting is a common tax strategy among smaller contractors because it allows for tax deferrals on revenue that’s been billed but not yet collected (cash). It does not allow for complete transparency into revenues and cost. Companies that use cash-based accounting are less likely to have a full understanding of their business because they don’t have accurate insights into their accounts payable and accounts receivable. Because of this, it’s better to run your business on an accrual basis for better visibility and then convert to cash for tax reporting purposes.

Accrual-based accounting allows companies to record revenue accurately and fairly. Accrual-based accounting requires companies to carefully monitor the performance of their projects and bill customers accordingly. It also helps ensure that contractors do not pay themselves prematurely.

Construction Billing Software

The construction industry uses a wide range of billing methods to invoice clients. These vary depending on whether the contractor uses unit billing, time and material, or lump sum. They also vary by how much work gets included in each invoice and whether there are multiple phases or stages to the project.

Time and materials projects typically bill hourly, allowing contractors to charge for the actual hours worked on a job. This method is often preferred because it provides greater transparency into the cost of a project. However, it requires careful tracking of tasks performed and hours spent on the job, making it difficult to accurately estimate project costs without additional information.

AIA progress billing is based on the percentage of work completed and invoices provide detailed breakdowns of the types of work completed and billed. This method is effective for billing based on the estimated amount of work being completed but requires the contractor to keep meticulous records of the amount of work completed and the total number of hours spent on the job.

Retainage is not billed the same way as other client billing and requires special treatment. Clients may withhold part of the initial contract payment until they are confident that the project has been completed. This withholding could occur at any stage during the project, including before beginning work. Once the project is complete, the outstanding retainage can be billed and collected.

Construction Payroll Software

Construction payroll software helps small businesses manage their human resources by automating the process of paying employees and complying with union policies, tax withholdings and wage reporting requirements.

Managing construction payroll can be challenging for companies with limited HR resources. This complexity is especially true when considering the many factors involved in determining a fair pay rate. There are multiple considerations to take into account, including prevailing wages, unionization and state and local taxes. These challenges make it essential to have accounting systems to help accurately calculate payroll, keep accurate records and ensure compliance with regulatory rules.

Estimating Software

A construction firm's ability to estimate work correctly is critical for success. Estimating software helps construction firms create accurate estimates. Estimating the costs of a construction project is an integral part of construction management. After meeting with a client, the project manager enters the construction estimating phase to determine the project's feasibility, the actual construction budget and the completion schedule.

Construction cost estimating and scheduling cover all elements of project costs, including equipment, escalation and adjustments, administrative fees, labor costs, materials, profits, preconstruction takeoff, sub-contractor costs and more.

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Construction accounting software offers tailored features to navigate the intricacies and requirements of the industry. Construction companies seeking precision, efficiency and strategic financial control should look for software with the following essential features:

1. Purchase order and subcontract management: Whether you self-perform on your jobs or you sub out all of the work, high-quality construction software can track your purchasing and subcontract agreements. You will have the capability to automatically track all job costs to effectively manage supplies, material and subcontractor expenses. With this feature, it is easy to monitor retainage, material billings and committed costs throughout the job lifecycle so jobs stay profitable.
2. Field mobility: With field mobility tools, you can streamline workforce engagement with easy login for time tracking, daily field reports, expenses and key employment details. Approve invoices, request materials and perform service work effortlessly while accessing vital reports anytime.
3. Cloud-based accessibility: With a cloud-based system, you can ensure real-time access to financial information, fostering collaboration and adaptability in a dynamic construction environment. Cloud-based software provides the freedom of remote access, empowering on-the-go professionals to manage construction financials anytime, anywhere. Assess your software's reliability by determining if accessing your data remotely, in real time, is easy.
4. Equipment tracking: Track the usage, maintenance and costs associated with construction equipment. If you are losing money on equipment, you can use real data to help you make informed decisions on rates and fees. You can also turn your fleet of equipment/tools into a profit center and charge accurate rates to earn money on your equipment.
5. Inventory management: Manage and optimize inventory levels, preventing shortages or overstock situations. With inventory management, you can credit your job costs when an item is returned from a job and put back into inventory, catalog actual inventory of supplies to take advantage of scale pricing by purchasing in bulk and scan inventory using any mobile device to immediately track stock levels.
6. Project management: Project management tools provide businesses and construction managers with intuitive scheduling to keep jobs organized, on time and profitable. You can get an overview of the resources you have and the manpower you need for every job. Document management tools help organize important documents (such as RFIs and submittals), track their status and get notified with action items. Keep track of employees, subs, equipment and crews with easy-to-use dashboards—preventing double booking and other scheduling errors that cost you time, money and risks.
7. Customer relationship management (CRM): With CRM you can maintain a comprehensive database of client interactions, improving customer relations and communication. Stay in front of prospects and customers and provide them with a positive customer service experience. Focus on sales to win and maintain business and then easily manage customer communications to improve customer retention. With these advantages, you will see the benefits of more jobs, increased profits and happier customers.
8. Construction payroll Integration: Seamlessly integrate payroll processes with accounting systems, ensuring accurate and timely payments to employees. Whether it is delivering taxes, employee payments, direct deposits and year-end documents or consulting on prevailing wage and certified payroll, construction payroll experts can help you every step of the way.
9. User-friendly interface: A user-friendly interface enhances the software's accessibility and usability. For example, dark mode options reduce eye strain and enhance user experience during extended usage.

Accounting software that is designed for the specific needs of construction firms can make your job a whole lot easier. Using tailored construction accounting software allows you to gain a greater understanding of your business and reap benefits like the ones listed below.

Proactively Predict Profits

Improving your profitability management through a construction accounting software solution such as Deltek ComputerEase allows you to proactively manage your jobs rather than reactively—essentially predicting more accurate profits. By proactively managing your jobs it is easier for you to expand your services, expand into different states and potentially win larger and more complex projects.

Improve Job Visibility

When it comes to managing finances and project management, construction accounting software enables construction firms to produce detailed and accurate accounting reports compared to standard accounting software. It also gives more insight into potential risks that could affect you mid-project, such as change requests.

For example, a concept unique to the construction industry is work in progress (WIP). Without the right software, construction firms are not able to precisely manage WIP and prepare accurate financial statements since standard accounting software is not built to support WIP. These accurate reports will help you understand the financial success of your business and your jobs and it will be easier for you to receive financial assistance, such as a bond for a job or line of credit.

Increase Cash Flow

Construction accounting software often integrates with other business applications such as project management software and estimating software. This integration provides construction firms with a complete view of their projects, from the initial estimate to the final invoice, helping you manage cash flow, employees and job completion. By using construction accounting software, you will avoid costly mistakes that will decrease your cash flow like inaccurate time sheets, delayed invoices and manual input errors and delays.

Accounts receivable and accounts payable automation can digitally transform a company’s cash flow. Solutions like Deltek Payments can benefit your company by establishing a modern experience, increasing security and control and reducing excessive operational costs like managing payments manually.

Manage Construction Requirements

Construction jobs may have unique requirements that are not accommodated by standard accounting solutions, such as prevailing wage, AIA billing, certified payroll, union and complex local payroll tax scenarios. Construction accounting software can help construction firms comply with government regulations by allowing them to track their jobs and expenses per those regulations. This information can be used to generate reports that show how much money was spent on a project, what materials were used and who worked on the project. This information can be helpful in auditing projects and ensuring they are completed according to the contract.

Access Customizable Reports

In the construction industry, contractors can vary by trade, region, union/non-union or commercial/residential. It’s critical for your construction accounting software to be flexible and meet your unique needs with accurate and customizable reports so you can stay up to date with your financials at every stage of your jobs.

Improve Communication to the Field

It’s often difficult for contractors to manage the job site from the office, lacking visibility and connectivity to the field. Solutions like Deltek ComputerEase offer a full suite of mobile field applications that sync the office to the field so that you and your team can stay informed in real-time, whether it’s tracking time, managing work orders, submitting field logs or recording field expenses.

Deltek ComputerEase is the leading construction software provider of job costing accounting, project management and payroll services—delivering solutions that help customers connect and automate the project lifecycle that fuels their business. Deltek ComputerEase’s dedicated team is committed to providing service excellence and product innovation, adapting to the evolving construction compliance requirements.

If you are currently using a generic accounting solution that’s built for standard accounting processes, you will undoubtedly benefit from switching to a dedicated construction accounting solution. Contact us today to learn how Deltek ComputerEase can help you to boost your profitability.

Transform Your Construction Accounting With Deltek ComputerEase

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