Many people believe, as the saying goes, that “you can never please all of the people all of the time.” True as that statement might be, successful construction business owners never stop trying.
When it comes to a contractor’s accounting system, the goal should be to find a system that will help the entire company, not just the accounting office. Many of today’s construction-specific accounting systems, fortunately, go far beyond basic bookkeeping functions to offer companies a complete solution capable of meeting the needs of everyone—from the owner and the accounting staff to field operations and everyone in between. Even individuals outside the company (CPAs, surety associates, and bankers) will benefit from a system that provides detailed reporting of a contractor’s financial operations.
Not just any accounting software has the ability to please so many people. Only job cost accounting software, with its many construction-specific functions and features, will have widespread appeal. Here are the advantages, broken down by job title and responsibility:
Construction business owners and executive managers don’t have time to oversee every single transaction added to their accounting system. Nor do they want to. What they do want from an accounting system is:
- Timely and accurate job summary reports (such as cash flow, estimated vs. actual, over/under billing, and overhead allocation) that give them the “big picture” look at how their jobs are doing;
- Powerful and flexible reporting capabilities, including built-in standard reports and customizable report designers, so they can see their data exactly how they want to view it;
- Easy-to-analyze graphical data (e.g., dashboard technology) that allows them to see—at a glance—how their company is doing;
- Most importantly, software solutions that can help manage cash flow and improve profits.
As the person who is responsible for the company’s accounting functions and procedures, the construction CFO/controller wants a system that conforms to the way contractors do business. Most general business accounting systems, for example, are not designed to handle the percentage of completion method of accounting, which is the most accepted method for commercial contractors. Specifically, the CFO/controller wants:
- An integrated job costing system capable of tracking detailed job costs while automatically updating the General Ledger;
- Easy handling of construction-specific functions (such as multiple pay rates, certified payroll, and AIA billings);
- Complete date sensitivity and audit trail features, which make it easier to compile reports while giving them confidence in the data’s integrity;
- Above all, a system that minimizes time-consuming tasks (such as redundant data entry and spreadsheet reporting) so that they have more time for higher-level activities and analyses.
While construction executives and upper management generally want access to one line per job summary reports, project managers want to see as much detail as possible. They want an accounting system that provides:
- Reporting and job cost breakdowns on many levels—from total job costs to labor costs per task, costs per cost category, costs per unit of measure, and labor productivity;
- The ability to link with popular estimating packages or spreadsheet applications to import detailed job cost budgets;
- Drill-down features, which allow users to click on a report and “drill down” into details (or even the original transaction) to help explain any discrepancies or trends;
- The ability to track equipment costs and usage and maintain inventory control, if needed;
- Optional document control/project management modules for tracking submittals, RFIs, field logs, change orders, purchase orders, subcontracts, and more;
- An optional scheduling module to help track tasks and resources and keep jobs running smoothly.
Responsible for day-to-day accounting transactions and data entry, accounting personnel (payroll and billing clerks, for example) need a system that will make their job easier and more efficient. To help keep productivity high and overhead low, a construction accounting system should:
- Include easy data import capabilities, such as the ability to import payroll timecards, for efficient transfer of data from the field;
- Automatically calculate pay rates, maintain taxing authorities, and provide other time-saving default features for smoother payrolls;
- Provide billing flexibility, including integrated AIAs, unit price billing, and time and material billing, plus offer the ability to design invoice templates;
- Offer tight integration between modules to help reduce data entry and prevent errors;
- Eliminate the headaches of manual calculations, spreadsheets and data “silos” maintained outside the accounting system;
- Offer simple functions to “undo” transactions—but with a complete audit trail;
- And most importantly, be easy-to-use and intuitive.
An experienced construction-focused CPA adds tremendous value to a construction company by providing his/her expertise in accounting, financial and tax planning, and more. In order to be effective, a CPA must review his/her client’s bookkeeping on a regular basis. This process is more productive when a contractor’s accounting system includes:
- The ability to make corrections or re-class items with just a few mouse clicks;
- Easy access to financial reports and pertinent financial data;
- Date-sensitive transactions that allow immediate access to reports from any date range;
- Complete audit trails, with each adjustment saved as a separate transaction;
- A centralized console where they can go to easily compile reports and transaction records necessary for the typical audit/review.
Not every construction company is large enough, or lucky enough, to have its own IT department. But even an outside technology consultant will offer a similar perspective when it comes to a contractor’s accounting software. IT’s wish list is small but comprehensive:
- A system that’s built upon a powerful database engine (e.g., Microsoft SQL), which offers such advantages as compatibility, speed, security, flexibility, and scalability.
Yes, pleasing everyone is a difficult feat, especially when it comes to new technology. But what if it were possible to find a product that had the capability of helping the entire company improve productivity, efficiency and, most importantly, profitability? Many of today’s construction accounting software systems have the power to bring everyone together working toward a common goal: success.
*Published in Modern Contractor Solutions