How to Choose Construction Accounting Software: Essential Features Revealed

Construction projects face money problems that regular bookkeeping can't solve. The construction industry grew 2.2% in 2021, yet many companies still find financial management challenging. Let's get into why standard accounting tools don't work and what money obstacles construction companies face.

Why general accounting tools fall short

Standard accounting software only tracks past events - regular revenue, expenses, and payments. Construction accounting software does more by connecting money data with operations and shows live insights into job profitability.

Regular accounting tools have these big limitations for construction businesses:

• Limited project tracking: Standard software lacks job costing, contract management, and progress billing features that construction needs
• Missing forecasting tools: Regular systems track numbers but don't provide budget tracking and job-level visibility needed for quick decisions
• Restricted access: Accountants usually control financial software access, which leaves project managers and field staff without vital data
• Insufficient reporting: Traditional accounting programs don't have construction-specific reports like commitment reports, job cost analysis, and change order tracking

Construction companies using simple accounting tools often find cost overruns after projects end, which hurts their profits.

Premier's construction accounting software fixes these problems with job-specific tracking tools that show every money aspect of your projects clearly.

Industry-specific challenges in construction finance

Construction accounting is different from general accounting because it focuses on projects rather than business operations. This creates unique financial challenges:

Project-based complexity: Each construction project works like its own profit center with unique financial details. You must track costs and revenue for each job separately to know true profitability.

Decentralized operations: Construction happens at many job sites instead of one place. Your accounting system needs to handle travel costs, equipment moving expenses, and different local rules for each location.

Extended timelines: Construction projects often run through several accounting periods or years. Small contractors see even modest projects stretch out from weather delays or material shortages, which makes financial reporting harder.

Unpredictable costs: Material prices, labor costs, and other expenses often change during projects. One fact stands out: "The price of labor and materials can change considerably over the life of a long-term project, and those changes are often not easy to predict".

Cash flow challenges: Money flow ranks as construction's biggest problem. Late payments, uneven revenue, and long project times create financial instability that regular accounting systems don't deal very well with.

Specialized billing methods: Construction uses unique billing approaches like progress billing, AIA formatting, and percentage-of-completion methods. These special techniques need accounting software built for construction workflows.

Retainage management: Most construction contracts hold back 5-10% of payments until project completion. This practice creates major cash flow challenges that need specialized accounting tools.

Change order tracking: Contractors see change orders as normal parts of business. Without proper tools to document these changes, project profits can quickly disappear.

Premier's construction accounting software has built-in solutions for these industry challenges. Its special features help you watch project profitability, control cash flow, and make smart decisions throughout construction.

Construction accounting goes beyond tracking numbers. It needs specialized tools that show project finances clearly. Understanding these needs helps you pick accounting software that solves your construction business's real challenges.

Profitable construction projects depend on accurate job costing. Your project's profitability becomes a guessing game without proper expense tracking against budget. Leading construction accounting software simplifies this financial monitoring and gives you valuable insights that affect your daily bottom line.

Track actual vs estimated costs

Your project's health becomes crystal clear when you compare actual costs against your estimates. Modern construction accounting tools let you monitor expenses immediately instead of waiting until project completion. This up-to-the-minute data analysis helps you spot budget variances early enough to fix them.

Most contractors lack confidence in their job cost numbers. This uncertainty comes from outdated tracking methods, nearly 85% of contractors find cost overruns only after completing their projects. Quality job costing software lets you:

• See expenses versus budget day by day
• Spot cost overruns before they spiral out of control
• Get automated alerts when expenses approach budget limits
• Generate reports across any date range to see complete financial picture

Premier's construction accounting software handles this tracking automatically and compares actual expenditures against your original budget in up-to-the-minute updates. This feature changes reactive management into proactive financial control.

Use cost codes and cost types

Cost codes bridge project management and financial tracking. These standardized identifiers sort expenses into logical categories, which helps you understand where money flows throughout your project lifecycle.

A well-laid-out cost coding system breaks down expenses into specific categories like labor, materials, equipment, and subcontractor costs. This detailed approach brings several benefits:

Cost codes standardize your documentation process and create consistency across all projects. They enable up-to-the-minute cost tracking when merged with your accounting software. The codes help identify which project parts exceed budget limits and reveal profit margins for specific work types.

Start by grouping costs by divisions (concrete, electrical, plumbing) and then by cost types (labor, materials, equipment). Premier's accounting software supports both standard CSI divisions and custom cost structures, matching your existing workflows perfectly.

Improve bidding accuracy

Past job cost data helps create more accurate future bids. Construction companies using previous project information for new estimates substantially reduce their failure risk, this is crucial since one in five contractors fail within their first five years.

Each bid becomes a financial gamble without analyzing your estimate history. So many contractors either underbid and lose money or overbid and lose opportunities. Digital solutions add structure and automation that minimize human error in your bidding process.

Reliable bids start with accurate takeoffs. You create a feedback loop that improves your estimating precision by tracking actual costs against estimated expenses. This data helps you:

Learn which project types historically yield the best profits See which estimators consistently produce the most accurate bids Know your optimal market position based on past performance Adjust for seasonal fluctuations and regional cost differences

Premier's construction accounting software creates this historical record automatically and gives you data needed for competitive yet profitable bids. The system keeps detailed cost records sorted by project type, making it easy to reference similar past work for new estimates.

Your financial management system drives profitability from project start to finish by connecting job costing, cost codes, and bidding processes. These features form the essential core that construction accounting software must deliver to support your business growth.

WIP reporting serves as the foundation of financial management in construction projects. These reports track projects from beginning to end. They give you valuable insights about your financial position and keep stakeholders updated about ongoing work. Construction accounting software uses this key feature to help you maintain healthy cash flow and accurate financial records throughout your projects.

Monitor project progress and billing

WIP reports show snapshots of all ongoing projects. You can track job status, expenses, and completed work percentage easily. The reports compare contract values against actual costs incurred to show if projects are moving forward as planned.

Financial experts say connecting WIP reports with daily logs and progress reports creates detailed documentation. This shows the exact amount of work completed at any given time. Both contractors and clients benefit from this accountability:

• They can verify completion percentages against actual site progress
• They can link invoices to specific milestones and deliverables
• They create transparent records for all financial transactions
• They have documentation ready if disputes need to be settled

Premier's construction accounting software creates WIP reports automatically. These reports connect financial data with on-site progress to give you full visibility into project status without manual work.

Forecast revenue and cash flow

Cash flow management remains construction's biggest challenge. WIP reporting helps solve this by showing clear forecasts of upcoming financial needs and expected revenue streams.

Cash flow forecasting looks at all money moving in and out of your business over specific timeframes. Construction companies with multiple ongoing projects find multi-year forecasts most valuable. These forecasts help you:

First, spot potential cash shortages before they affect operations. Second, build appropriate cash reserves for business disruptions. Third, make informed decisions about new projects based on current financial commitments.

Your forecasts should include settled cash balances, all revenue sources, operational expenses, and seasonal changes for best results. Premier's construction accounting software has built-in cash flow projection tools that blend with your WIP reports. This gives you financial clarity without complex manual calculations.

Avoid underbilling and overbilling

Your financial stability depends on the relationship between billing and completed work. WIP reports quickly spot differences between these figures to help you maintain accurate financial records.

Underbilling happens when you charge clients less than you should based on completed work. This creates immediate cash flow problems and can hurt your ability to pay suppliers, subcontractors, and employees. Long-term underbilling might indicate poor project management and affect your credit score.

Overbilling occurs when you invoice more than your completed work. This gives a temporary cash boost but damages client trust. It also creates future financial problems when remaining work costs more than the remaining billable amounts.

These practical strategies prevent billing issues:

1. Do regular job cost audits to find problems early
2. Check contracts carefully before sending invoices
3. Document and get approval for all change orders right away
4. Use integrated project management and accounting systems

Industry experts say you should stay "cash-neutral" on jobs instead of using overbilling to fund operations. Premier's construction management software has automated billing features that create invoices based on project milestones, time and materials, or other preset criteria. This reduces billing cycle delays.

Specialized construction accounting software with proper WIP reporting gives you project finance visibility that basic accounting programs can't match. This financial clarity helps you make proactive decisions, keep healthy cash flow, and deliver more profitable projects.

Labor costs eat up 30-40% of a construction project's budget. This makes payroll management crucial to financial success. Construction companies need more than just check-cutting skills - they must navigate complex compliance rules that change based on worker types, locations, and project funding. The right construction accounting software helps make this task much simpler.

Handle union and non-union wages

Collective bargaining agreements (CBAs) set the rules for union payroll. These agreements define wage rates, benefits, and working conditions. Union and non-union payroll processing have some key differences:

• Union workers usually get higher wages and better benefits than their non-union peers
• Each trade's union negotiates its own deals about pay rates, work hours, and fringe benefits
• Union contracts mean businesses must follow strict government reporting rules
• Companies need accurate union records to pass regular audits

"Managing unionized workers can have a complicated impact on payroll," notes one industry expert. Things get trickier when contractors juggle multiple workers who get different pay rates and have various deductions from different unions.

Non-union payroll gives more room to maneuver but comes with its own challenges. Companies must work out wages and benefits with each worker since there's no union agreement, while still following labor laws.

Premier's construction accounting software takes care of both union and non-union payroll. The system automatically applies the right rates based on worker type, job category, and location.

Manage multi-state payroll and tax rules

Working across state lines creates unique payroll challenges for construction companies. Every state has its own tax rules, filing dates, and compliance needs.

Tax obligations depend on several things:

1. Your company's nexus (legal presence) in a state
2. State reciprocity agreements that let you withhold income tax only from an employee's home state
3. Non-resident certificates filed by employees who work but don't live in certain states

Nexus plays a big role since it determines if you need to withhold state taxes from wages. You create nexus by having an office, factory, or even just one employee working in a state.

Local tax rules make things even more complex. There are 4,964 local tax jurisdictions in 17 states that might have extra requirements. Rust Belt states like Ohio and Pennsylvania have some of the most complex local tax systems.

Premier construction management software makes this easier by figuring out the right tax withholdings based on where projects and workers are located.

Automate certified payroll reporting

Government-funded projects require weekly certified payroll reports from contractors. These reports show that workers get prevailing wages according to the Davis-Bacon Act and Related Acts.

Every certified payroll report must list:

• Each worker's full name and ID number
• Work classification
• Daily hours worked (including day, date, regular time and overtime)
• Pay rate
• Gross earnings
• All deductions and final net wages

"By verifying contractors are paying required prevailing wages and fringe benefits, certified payroll reports help protect the livelihood of workers on federally funded contracts," explains one industry source. Late or incorrect reports can lead to penalties.

Prime contractors must make sure all subcontractors submit their payrolls too. State-funded projects might need extra state or local certified payroll reports beyond federal Form WH-347.

The right construction accounting software creates these reports automatically. This saves lots of time - 54% of contractors save 1-4 hours on certified payroll reports, while 25% save 5-10 hours by using specialized software.

Construction companies need accounting software that handles these payroll and compliance challenges effectively. Premier's construction accounting software creates reports that work with various systems. It manages compliance requirements that regular accounting programs just can't handle.

Construction billing is more than simple invoicing. Construction accounting software's specialized billing features help you manage different billing methods and track retainage, money held back until project completion. These features will give a better cash flow and stronger client relationships.

Support for AIA, T&M, and progress billing

Construction projects use several billing methods that need specific documentation and tracking capabilities. Good accounting software handles all these approaches without manual workarounds.

AIA Billing uses standardized forms developed by the American Institute of Architects. The format breaks payments into clear steps using two main documents:

• G702 (Application for Payment): Shows total contract value, work completed, and payment requested
• G703 (Continuation Sheet): Provides detailed breakdown of completed work with corresponding values

AIA billing gives both contractors and clients transparency by documenting completed work. This standard process cuts down errors, makes payment processing easier, and becomes valuable reference material when payment disputes happen.

Time and Material (T&M) billing tracks actual labor hours and materials used throughout a project. T&M reports include:

• Labor costs with hourly rates and total hours worked
• Material costs with quantities and unit prices
• Equipment usage details
• Pre-agreed markup percentages

Progress billing (or milestone billing) lets contractors invoice based on completion percentages instead of waiting for project end. Contractors can maintain steady cash flow on longer projects this way. Each invoice shows the total value of work completed so far, minus retainage.

Premier's construction accounting software makes these billing processes automatic. You'll spend less time on paperwork and get paid faster.

Track retainage on receivables and payables

Retainage is a portion of each payment, usually 5-10% of the contract value, held back until project completion. This protects clients from incomplete or substandard work but creates cash flow challenges for contractors.

Accurate financial management needs proper tracking of both retainage receivable (money owed to you) and retainage payable (money you owe subcontractors). Your accounting system should record receivable retainage as an Other Current Asset and payable retainage as Other Current Liabilities.

Here's an example of a $100,000 job with 10% retainage. Your $20,000 payment application would show:

• Original contract amount: $100,000
• Current payment due: $20,000
• Retainage deduction: $2,000 (10% of $20,000)
• Final amount due: $18,000

You should follow up on retainage to collect it on time. Detailed documentation of completed work that meets specifications will help release retainage faster.

The right construction accounting software shows all outstanding retainage amounts quickly. This helps you plan for future cash needs. Premier's software tracks retainage automatically on both receivables and payables, showing you these deferred payments clearly.

Generate accurate invoices

Construction invoices need specific information to get prompt payment and meet contract requirements. A complete invoice includes:

• Project and contract details
• Contractor, client, and architect contact information
• Description of completed work
• Original contract price and approved change orders
• Materials incorporated or stored on site
• Retainage amount withheld
• Previous billings and current amount due

These invoices often need supporting documents, especially for payment applications. You might need to attach a Schedule of Values (SOV), change order logs, daily reports, photo documentation, and vendor invoices.

Construction accounting software works better than manual invoicing. It creates industry-standard billing documents automatically, calculates retainage correctly, and keeps all payment records in one place. You'll make fewer mistakes, bill faster, and manage cash flow better.

Premier construction software makes invoice creation simple with templates for each billing type. The system applies the right retainage percentages based on contract terms, so calculations are always accurate.

Good materials and equipment management directly affects your project's profitability. Construction accounting software needs resilient tracking systems that give you complete visibility of your physical assets and supplier relationships.

Track materials and supplies across sites

Material tracking gives every stakeholder complete supply chain visibility for construction projects. Quality construction inventory management software lets you:

• Receive inventory to unlimited warehouses, trucks, or worksites
• Transfer items between stocking locations and jobs
• Link inventory receipts to purchase orders and A/P invoices
• View detailed inventory histories and reconciliations

Cloud systems give you immediate information that helps you respond quickly to business events. You can contact suppliers for restocks or send updates to managers within seconds. This visibility prevents projects from stalling because materials get misplaced or become unavailable.

Premier's construction software has inventory tracking that shows material locations, quantities, costs, and current values. You can access this information from any device with internet connectivity.

Monitor equipment usage and maintenance

Construction companies own large asset portfolios that include bulldozers, excavators, cranes, loaders, and graders. Good equipment tracking helps you:

You can spot inefficiency in your preventative maintenance program. Track equipment hours, battery life, and overall health. Route the right machines to job sites exactly when needed.

Equipment monitoring turns time-consuming processes into simple dashboard reviews. Location tracking reports confirm equipment positions at the start and end of each workday.

"Construction equipment must be properly maintained to stay in optimal working condition," notes industry guidance that emphasizes preventative rather than reactive maintenance. Premier's accounting software helps schedule maintenance based on usage hours, which reduces emergency repair costs.

Manage vendor contracts and payments

Construction projects involve many vendors, making contract management crucial. Good payment management keeps financial stability and smooth project operations.

Construction payment process needs contract agreement, payment scheduling, invoice processing, approvals, fund disbursement, lien waiver management, and record keeping. Quality construction accounting software streamlines these processes through:

• Faster transactions with automated approvals
• Immediate tracking of project financial status
• Integrated budgeting tools for accurate resource allocation

Premier's construction accounting software optimizes vendor management. It centralizes contracts, automates payment workflows, and shows your financial obligations and upcoming payments in real time.

Strong inventory, equipment, and vendor management features save hours of work. They prevent expensive mistakes that could derail your projects.

Successful construction projects depend on accurate financial reporting and regulatory compliance. The right construction accounting software gives you tools that turn raw data into useful business insights.

Generate GAAP-compliant financial reports

GAAP compliance is the life-blood of financial integrity for construction businesses. A complete set of financial statements under GAAP has the balance sheet, income statement, cash flow statement, and footnote disclosures. Construction companies add supplemental schedules that show jobs in progress and completed projects.

GAAP principles help you:

• Maintain transparency with lenders and investors
• Create regulatory-compliant financial records
• Provide a full financial picture to stakeholders

GAAP builds on four simple principles: historical cost, revenue recognition, matching, and full disclosure. Companies that violate these standards risk financial restatements, regulatory attention, damaged investor confidence, and legal issues.

"A proactive stance to your balance sheet maintenance not only makes year-end reconciliation easier, but it also keeps your company financially fit and agile all year long," notes one industry expert.

Use dashboards for real-time KPIs

Financial dashboards automate report generation to reduce manual effort and minimize errors. This automation keeps your financial data accurate and current.

Premier's construction accounting software has executive dashboards that show live, high-level views of projects and company performance through interactive graphs and charts. These dashboards display job costing, change orders, over/under billing, cash flows, payables, and receivables.

Good dashboards let you:

1. Drill down from high-level graphs to detailed reports
2. Filter views by project manager, class, or job
3. Customize displays for different users' needs

As one accountant puts it: "The Executive Dashboard is wonderful for our company officers that want a quick and easy-to-understand overview".

Ensure tax and regulatory compliance

The IRS inspects the "tax gap" between taxes voluntarily paid and what's actually due, with special attention to construction companies. The right accounting software helps you maintain compliance with these strict requirements.

Construction businesses often use two different tax accounting methods: one to handle long-term contracts and an overall method (usually accrual) for other items. Your software should support both cash and accrual methods and track business expenses correctly.

Premier construction management software helps track compliance requirements that general accounting programs cannot handle. Built-in tax compliance tools help you keep up with trends while you focus on your core business, building projects profitably.

Cloud technology has changed how construction companies manage their financial data and projects. Cloud-based construction solutions offer access anywhere through internet-connected devices, unlike traditional software that ties users to office computers.

Benefits of cloud-based ERP like Premier

Cloud-based construction accounting offers several advantages over on-premises solutions:

• 24/7 accessibility - Users can access financial data and reports from anywhere using phones, laptops, or tablets
• Automatic updates - Software providers handle maintenance and deliver new features without IT support
• Cost reduction - Users save money by avoiding expensive hardware purchases and maintenance costs
• Enhanced security - Enterprise-level protection guards financial information
• Adaptable growth - Systems expand with your business without major infrastructure costs

"Cloud-based accounting and vital company data can easily be accessed by authorized users as long as they have a device with internet access," notes one industry source. Premier's construction management software uses cloud capabilities to give complete financial visibility wherever work takes you.

Mobile time tracking and expense entry

Mobile applications have changed construction time tracking completely.

GPS-enabled time clocks monitor employee work locations, even offline. Paper timesheets become unnecessary while accuracy improves. Teams can document their progress and check budgets right from job sites.

Mobile apps collect data immediately instead of waiting for paper reports to reach the office. "The data is always collected in real-time," explains one expert, "allowing contractors and project managers to be fully informed at all times". Premier's accounting software has mobile features that make payroll processing easier and reduce administrative work.

Integrate with project management tools

Your accounting system's connection with other construction software creates one source of truth. Your takeoff software, time tracking, and financial systems work together naturally.

Integration brings faster transactions with automated approvals, immediate project status updates, and central document storage. Team members can access current information without searching through separate systems.

Premier's software works with many project management and accounting platforms to make operations more efficient.

Your company's financial health depends on choosing the right construction accounting software. This piece shows how specialized features tackle real challenges that construction businesses face every day.

Standard accounting tools don't measure up. They lack job costing capabilities, WIP reporting, and retainage tracking. Purpose-built construction software gives you live insight into project profitability and cash flow. You can spot potential problems before they hurt your bottom line.

Job costing is the foundation of profitable construction projects. Your software must track actual versus estimated costs precisely. Premier's construction accounting software does this comparison well and alerts you when expenses near budget limits.

WIP reporting is a vital part of maintaining financial stability. Your software should create these reports automatically. This helps you avoid underbilling and overbilling situations that affect your cash flow.

Payroll management creates huge administrative headaches for many contractors. A good system handles union and non-union wages while automatically creating certified payroll reports for government projects. Premier's construction accounting software makes these tasks easier and saves hours of work each week.

A complete construction accounting solution must track materials, equipment, and vendor relationships. Cloud access and mobile features let you handle finances anywhere - at the job site or in the office.

The right software grows with your business. Premier construction management software adapts to meet your needs, from small residential projects to major commercial developments.

Construction-specific accounting software gives your company better financial control and improved profitability. Start using these specialized tools today to build not just structures, but lasting financial success.