Construction Accounting Software: When Is The Right Time to Upgrade?

If you run a growing construction company, you might be curious about the value of transitioning to a specialized construction accounting software. These accounting platforms contain a wide variety of features tailored to the needs of business just like yours, from automated WIP schedules to advanced job costing and AIA billing tools.

There’s no question these tools have a lot of horsepower. Used appropriately, they can dramatically streamline accounting processes in your business. But they’re also expensive, with leading platforms costing tens of thousands of dollars a year. And all of the power and sophistication comes with a downside: Without the right knowledge, skills and experience, it’s easy for your accounting team to become overwhelmed.

It’s crucial that your business has the financial sophistication necessary to handle this complexity before you pull the trigger on a new solution. In this overview, we’ll explore how to gauge your accounting department’s level of readiness. We’ll also share what sets specialized construction accounting software apart from more generic solutions.

Construction Accounting Software vs. General Accounting Software

The majority of small to mid sized construction companies use QuickBooks Online. It’s a widely used, budget-friendly platform that comes with most of the basic accounting features a construction company might need.

Pretty much every bookkeeper, accountant and CFO is familiar with QuickBooks Online. The platform is easy to use and contains many fail-safes that prevent your team from making any significant mistakes. Paired with the right Excel workbooks and well-trained staff, QuickBooks Online should easily handle the majority of a small to mid sized construction company’s day-to-day operations.

Typically once a company reaches tens of millions of dollars in annual revenue, using general accounting software like QuickBooks works just fine for the majority of construction businesses up to a certain point. Past that point, however, businesses can likely gain from upgrading their financial infrastructure with more sophisticated construction software.

Think of it this way. QuickBooks Online, and other generalist accounting software platforms like it, are equivalent to a prop plane. It’ll get you where you’re going, but it won’t get you there particularly quickly. Most accountants with a baseline level of experience are comfortable operating it.

Construction accounting software platforms are akin to jet planes. They’re far more powerful and will get you to your destination much sooner. However, they’re much harder to pilot. There’s a lot more data and far more dials and knobs to understand. They can’t be operated by generalists; you need an experienced pilot with very specific training.

Adopting construction accounting software can dramatically streamline processes in your accounting department, improving access to financial information and enabling you to manage projects far more efficiently. But it’s only possible to realize all of these benefits if you have the right team in place.

When to Upgrade to Specialized Construction Accounting Software

If you’re ready to start taking the accounting and finance infrastructure of your construction company more seriously, it might be time to start thinking about upgrading to a specialized construction accounting platform.

The single biggest factor in determining when to upgrade to construction accounting software is the sophistication of your team. Having a talented, capable CFO supported by accountants that truly understand how to use this software should be considered a prerequisite to upgrading to a specialized tool.

Be prepared to make a significant investment in your company’s CFO to ensure they remain with your business long term. This person is your jet pilot, and it’s crucial that they don’t leave you mid-flight. Establish formal procedures for them to cross-train the rest of your accounting staff, and create a strong compensation plan that incentivizes them to stay.

At the right scale, and with the right talent, construction accounting software is absolutely worth the investment. That said, the potential risks can be significant. We’ve seen companies grind to a halt because they’ve moved to a specialized construction accounting software without having the right team in place.

Remember, these accounting systems are central to your business. It’s nearly impossible to operate without them; you can’t track costs, maintain a WIP schedule or invoice accurately. Get the transition wrong and everything will come to a standstill — including bidding on new jobs.

Choosing the Right Construction Accounting Software

There are several construction accounting software platforms to choose from. In many cases, construction companies look to combine project management and accounting into one platform. But the reality is that few tools are particularly well suited to that.

Generally, construction accounting, project management and estimation software platforms are built for one specific purpose. Foundation, for instance, is a great construction accounting platform but doesn’t handle project management as well as a tool geared for that function. Consider the use cases for each tool as you evaluate different options.

The best platforms contain powerful tools built expressly for construction companies. They can automatically generate WIP schedules, handle multi-company environments and effectively navigate the complex nuances of construction accounting (like AIA billings, committed costs, and more). They’re well suited to the granular nature of construction accounting and help manage cost codes, billing and percent complete accounting in a more precise way.

Construction accounting software is expensive and it’s important to undertake a cost-benefit analysis to determine the value each platform might unlock for your business. Don’t make this decision lightly; once you’ve committed to a certain platform, switching costs are extremely high. So it’s important you make the right decision the first time around.

James Moore: Experienced Construction CPAs

Upgrading to specialized construction accounting software is an important point in a company’s growth. It’s a significant investment in your accounting processes that, when executed correctly, has the potential to reap significant rewards.

But remember our metaphor from earlier: Construction accounting software is a jet plane. It will accelerate your journey and significantly streamline your accounting processes — but only if you have talented, experienced professionals in place to pilot it. If that’s not the case for your business today, continuing to rely on tools like QuickBooks Online is a sustainable path.

At James Moore, our construction CPAs provide accounting and advisory services to a wide range of construction companies, from ambitious, growing contractors to large, well-established businesses. Our professionals can support your business with outsourced accounting services, upskill your staff through structured training programs and help you clarify your financial story.

Contact a James Moore advisor today to learn more about how we can help your construction business build for a better future.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.