Construction accounting has always differed from that of other types of businesses because each project serves as its own profit center. Contractors must report revenue, expenses and payroll by job to stay on top of cash flow.
What’s more, your ability to win bids and remain profitable depends on your team’s ability to accurately estimate items such as labor, materials and indirect costs. That accuracy is, in part, driven by consistently tracking those costs on other projects. Added costs and procedures because of the COVID-19 pandemic have added another layer of complexity over the past year.
The bottom line is that it’s more important than ever to leverage your accounting software to stay solvent, compliant and competitive. To determine whether you’re making the most out of your system, consider the following four points:
1. Project needs. As a construction company grows and takes on more projects, or more complex ones, it tends to need more advanced functionality. Make a list of the types of activity and reporting your projects require. Next, match those needs against software features — from job-cost tracking to billing and invoicing to payroll and even inventory control.
For instance, certified payroll and compliance reporting may be required for government projects. Or perhaps you must track certain data to meet requirements for CARES Act funding, a Paycheck Protection Program loan or other tax relief.
2. Remote access. These days, mobile access — from the field or from home to facilitate social distancing — remains a priority. Remote access to your accounting system allows team members to see real-time project data from anywhere and allows direct, daily reporting of:
- Labor hours per person, per job, and
- Usage hours per piece of equipment and location.
You can then compare this information against budgeted amounts to catch potential overages and adjust as needed.
3. Integration. For seamless information sharing, your accounting solution should support various forms of timecard entry and integrate with construction project management software and other platforms in use. Also, if you outsource payroll to a third party, it’s good to be able to integrate with the provider’s system so it can import the pertinent information in a timely manner with minimal manual input.
4. Vendor support. A good first step in determining whether you’re maximizing the functionality of your current accounting software is to simply ask your vendor. Set up a meeting to discuss what’s working and what’s not and see how they respond. A worthy provider will address issues, provide training and offer ongoing customer support. Your CPA can also do a complete assessment on the effectiveness of your accounting system and how you’re using it.
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