Construction Accounting Software

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 question.

Whether your firm is one person or has hundreds of employees, your firm absolutely needs these things:

  • 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 comes around.

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 cost accounting". This type of accounting is ideal for construction and works like this.
  1. A job cost sheet is used to track all costs for a job.
  2. 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.
  3. All direct labor to the job is recorded on the job cost sheet.
  4. 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).
  5. 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.