5 Best Construction Accounting Software for 2025

In addition, tracking each project’s profitability can be tricky, particularly compared to other industries where expenses and revenues are lumped together in a single financial statement. The construction industry is unique in many ways, including the high price of contracts and length of projects. Often, construction companies have several projects on the go in different areas. Businesses that work in other provinces or even in the U.S. have additional costs to consider, such as tax payments. However, the more projects you have on the go and the more people that work for you, the more you need to have a reliable bookkeeping process.

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• Indirect costs are those which are essential to running your business across projects.
• We encourage you to research and compare multiple accounting software products before choosing one.
• Record electronic signatures for approvals and use the cloud-based document storage tool to keep everything you need one click away.
• Bill.com is widely used for automating AP tasks, offering ease of use and integration capabilities that are helpful for construction companies managing project-based expenses.
• They also offer several integrations to help simplify the day-to-day responsibilities of running a construction business.

The completed-contract method (CCM) of accounting considers all income expenses directly related to a long-term contract until its completion. By using this method, contractors may enjoy a break from taxes during the working phase and sometimes may even qualify for certain tax incentives in the meantime. However, this method of construction of revenue recognition is not GAAP-approved.

Select Revenue Recognition Methods

If you or your customer hasn’t planned and budgeted for these potential issues, they can cause the entire project to fail. You can also track and manage your construction projects with QuickBooks Online. Contract retainage is a common practice where customers pay contractors less than the project’s full cost.

How to Track Bidding and Project Costs

• Construction companies should use a percentage-of-completion method that recognizes both revenue and expenses as they are accumulated over time.
• There’s a range of software out there to fit different business needs, from simple accounting software for contractors with one crew to ERP software for midsized construction companies.
• As a reminder, accrual accounting recognizes transactions when they are earned or promised, regardless of when money actually switches hands.
• Additionally, invoices provide necessary tax information for the client and contractor, allowing them to keep accurate records and file their taxes on time.
• The payroll module uses Davis Bacon wage rates and includes union fringe and state tax rates.
• We looked at third-party ratings and reviews to see how actual users felt about the software.

Liabilities include accounts payable, contracts parable, bonds, mortgages, notes payable, and any other debts. Liabilities are any legal responsibility you hold to pay debts or fulfill contractual obligations; loans, deferred revenues, or other accrued expenses. They can be tangible (physical things like equipment, or intangible (non-physical like brand value). In the construction industry, assets are often tangible such as equipment, tools, and any materials needed to complete jobs. Assets include all cash, accounts receivable, equipment, and materials purchased or leased for a project.

• Construction accounting is an important part of any construction business because it helps ensure that the company has solid financial reporting.
• Job costing helps maintain organization in the construction accounting process since the accounts related to individual projects are kept separate from the centralized accounts.
• This can improve collaboration and ensure everyone is on the same page, regardless of location.
• When searching, try to strike a balance between user-friendliness and functionality.
• With the right guidance from RedHammer, you’ll be well-positioned to choose, implement, and maximize the benefits of AP automation tailored to the construction industry.
• Expenses/Overhead – For regular accounting, there is a clear distinction between the Cost of goods and the Overhead.

What should contractors do?

It’s a well-known tool that does the job well, provided you have the budget to pay for their service. It is a way to forecast a project’s costs by estimating things such as contractors, materials and supplies, and overhead. It is why it is best to use software suited to job costing for construction projects.

Understanding a chart of accounts in construction

• This article will introduce construction accounting, including the key principles and techniques for managing your construction business.
• Milestone payments are payments paid out after achieving a defined stage of progress on a project.
• She’s passionate about helping people make sense of complicated tax and accounting topics.
• There are a number of different revenue recognition methods you can use, like the completed contract method, the percentage of completion method, or the installment method.
• You can use this method of revenue recognition even if you’ve received payments during the contract period.
• They offer detailed job tracking for time, money, and materials, reporting on demand, payroll, and more.

It’s crucial to have something tracking daily transactions, though; it’s important not just to balance the How Construction Bookkeeping Services Can Streamline Your Projects books, but to help maintain an understanding of company costs for better job bidding. Esub, a construction software company, explains that construction work is very little like retail or manufacturing, and that’s true down to the financial records. In those industries, business is normally the same from day to day, and costs stay relatively constant and predictable over time.

Next, the price and length of construction projects make payment scheduling and collection unique. Across a variety of markets, contractors get paid upon delivery of a product or service. It can take months or even years to complete a job as a construction company. Not only that, but project costs can vary according to the weather, the season, or economic conditions, as do the cost of materials and strain on workers and equipment. So no two jobs are alike, making intentional contractor accounting essential for accurately conveying the financial wellbeing of your construction company. NerdWallet’s construction accounting software roundup favors products that have industry-specific features or integrations and prioritize job costing tools.

Pay Estimated Taxes

The simplest way to account for retainage is to include two sets of information on your invoices. This helps you get a better idea of how much money is coming in and going out of your business every month. Here are ten tips that can help to simplify and improve the way you handle construction bookkeeping.