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Technically Speaking
BY FRED ODE
Editor’s Note: Looking for answers to your tech issues?
Send your construction-related technology questions to heyfred@foundationsoft.com.
Is There a Better Way to Handle Retainage?
Q: I am having trouble finding
a way to get my accounting software
to handle retainage. Because
our reports don’t show retainage, my
accountant says it appears as though
we have past due receivables or we
are not billing properly. We currently
track retainage in a separate spreadsheet
and alter our billings month-to-month.
Is there a better way?
Don
A: There is definitely a better
way. Retainage is a common practice
in construction today and therefore,
every construction-specific accounting
package should handle it— some
more easily than others. The fact that
your software does not handle retainage
tells me that you are probably
using an off-the-shelf small business
system. My guess is that the system
falls short in other areas of job cost
tracking and reporting…and this is
just one chronic symptom of an ill-suited
product.
Don’t get me wrong, Don. Off-the-shelf accounting systems are
used by thousands of small business
owners everyday, and there are some
great products available. But these
systems often don’t allow contractors
to accomplish all they need to. In
addition to retainage, they generally
can’t track or report on other critical,
construction-related information
like prevailing wage rates, multiple
trades, job activities, percent complete,
change orders, PO/subcontracts,
quantities, equipment usage,
AIAs, union deductions and fringes
and so on. In addition, these programs
lack automatic data defaulting
and validation between modules,
both of which can save substantial
time and ensure accuracy.
Before you attempt to fix your software
to handle retainage, you need
to ask yourself these important questions:
1) “Are there other areas of my
business where I am missing timely
and accurate data?” and 2) “Does my
accounting software work the way my
construction business works?”
Fred
Disclaimer: Technically Speaking
reserves the right to change names and
edit questions for privacy, length, and
readability issues.
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