Construction accounting software varies greatly, just as your
construction firm varies from others. But, what do you absolutely need
and what can you add that would help you run your business? As an
accountant with over 15 years of experience, I can help you answer this
Whether your firm is one person or has hundreds of employees, your firm absolutely needs these
- Financial software where revenue and expenses
can be entered and reported.
- A method to track revenue and costs directly
related to a job.
- A method to allocate business expenses to a job
that is not directly related to an individual job.
The financial software you use should depend on your needs:
- How large is my firm
- Who will enter the information in the system?
Does this person know double entry accounting?
- How much am I willing to spend on software?
Financial software is available as double entry accounting type or a
type that is similar to entry into a checkbook. The double entry,
accrual type of accounting is far better, but the checkbook type works
for a very small firm. You need this software to round up all your
receipts and payments and make sense of all this stuff. It also will
show you how profitable you are and help with your taxes when April
Construction accounting software should grow as your firm grows. When
you are first
starting out you may use something like "Quick Books", then move up to
something like "Peachtree Accounting", and then maybe to more expensive
software that is specific to construction that will include specific
add on modules to help you improve your business.
If your accounting software does not include a job cost module, then
this can be done in a spreadsheet program like Excel. Construction
accounting is usually "job
. This type of accounting is
ideal for construction and works like this.
- A job cost sheet is used to track all costs for
- A materials requisition form is used for all
direct materials used on the job. The material from this sheet is then
recorded on the job cost sheet.
- All direct labor to the job is recorded on the
job cost sheet.
- All indirect labor and indirect costs are
allocated to each job based on an allocation method. For example:
office costs, insurance costs, equipment costs, etc are estimated to be
$50,000 for the year. I estimate that my firm will use 5000 direct
labor hours this year. Therefore, for every direct labor hour used on a
job, I will charge $10 to the job in non-direct costs (5000 labor hours
times $10 equals $50,000).
- After the job is complete, you can then
determine how profitable this job was by comparing the revenue to the
costs on the job cost sheet.
Job cost accounting can be the difference between making money and
losing money. When you quote your work you need to figure your direct
costs and your indirect costs. Job cost accounting can be done in Excel
or in a construction accounting software package.