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ACCOUNTING SOFTWARE ASK THE EXPERT  



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Ask The Accounting Software Expert

crm How is construction accounting software different than horizontal accounting software?

Construction accounting software has been adapted to the industry specific needs of various construction types, including home-building, heavy/highway, mechanical/HVAC and general construction. The most significant difference in terms of application functionality is a comprehensive job cost or project accounting module that is tightly integrated to every other finance module.

Construction accounting software is designed to meet several construction industry key performance indicators, including:

  1. Work In Process Valuation: Construction industry accountants mush closely monitor cash and inventory contained with work in progress. This is normally achieved by monitoring key current asset and liability balance sheet accounts.
  2. Cash flow: It is critical to understand which projects are generating or consuming cash at a near real time basis. Accelerated cash flow generation is facilitated with timely billing and collections.
  3. Labor utilization: Labor utilization is particularly critical for approved sub-contractors, as productivity delays or problems can quickly break low margin labor budgets and result in negative cash flow. Construction accountants can separate projects within a job in order to isolate discrepancies between actual and planned labor expenditures. This information helps managers and field supervisors to forecast percentage complete, cost-to-complete and bidding accuracy.
  4. Schedule variance: Project managers must have real-time project progress and status information. With increasingly complex project specifications and decreased cycle times, it is imperative that project managers have the information to identify and monitor schedule variance at the earliest availability. With the proper data, project managers are empowered to understand root causes affecting schedule variance, such as change orders and price variances.
  5. Margin variance: Margins for each cost type - such as labor, materials, equipment and burden - must be compared to project plan objectives on a frequent basis. With real-time attention to margin variance, corrective actions can be implemented in a timely fashion and before the project is complete.
  6. Unapproved change orders: Construction groups face an increasing economic threat from risk transfer provisions in standard contract types. Quickly identifying and pursuing unapproved change orders can reduce your firm's financial exposure.
  7. Committed cost. With rising labor prices and materials shortages, construction firms face financial exposure when suppliers and subcontractors are not contractually committed, especially on long term projects. Construction accounting software systems can track uncommitted costs in order to increase the proportion of committed costs where possible and to enable factors such as price escalation and contingent cost terms into their committed costs and limit financial exposure.
  8. Backlog. Properly tracking project backlog permits construction firms to minimize the problems related to insufficient work and profit fade. With this data, construction firms can quantitatively determine which projects to pursue.
  9. Customer satisfaction. To maintain a sustained competitive advantage, construction firms must meet owner expectations by tracking and analyzing qualitative feedback.

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crm What are the top construction accounting software systems?

In no particular order, the market share leading construction accounting software systems include:

  • Sage Software Construction Business Solutions
  • Dexter Chaney
  • BuilderMT
  • Microsoft Dynamics
  • Maxwell Systems
  • Sirius GT


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