Most articles about choosing accounting software compare products. That is the wrong starting point for a contractor, because the two contractors asking the question usually have completely different problems and one of them does not need new software at all.
The more useful question is which jobs you need the system to do, and whether the thing stopping you is the tool or the way it was set up.
The Five Jobs
- 1. Job costing that reconciles to the field. Labour, material, equipment and burden coded to the job and to a phase.
- 2. Percent complete and over or under billings produced from that cost data rather than assembled by hand.
- 3. AIA billing. G702 and G703 tied to an approved schedule of values, in the format the general contractor expects.
- 4. Retainage by contract, tracked and reported separately from current receivables.
- 5. Certified payroll, where you take public work, against wage determinations by trade and locality.
A contractor who needs one and two has a different buying decision from one who needs all five. Most general-purpose accounting products do one and two acceptably once structured properly, and do not do three, four and five at all.
It Is Usually the Setup, Not the Software
The most common complaint is that the job costing does not match what actually happened on the job. That is rarely the product. It is usually one of five setup problems that will follow you to any system you migrate to.
- A chart of accounts built for a tax return. Structured to fill in a form rather than to report by job and phase.
- Labour costed at bare wage. Without payroll taxes, insurance and workers compensation loaded on, every job looks more profitable than it is.
- Equipment used and never charged. Owned equipment that runs on a job at no cost to that job distorts the comparison between jobs.
- Coding discipline. Costs landing on the wrong job or the wrong phase, usually because coding happens at invoice entry with no reference back to the field.
- Committed costs invisible. Purchase orders issued but not yet invoiced do not show up, so the job looks cheaper than it is already committed to be.
Migrating a broken structure into better software reproduces the problem at higher cost. Fix the structure where you are, run it for a period, and migrate with something proven. See the chart of accounts that actually makes sense.
The Signals That You Have Genuinely Outgrown It
These are volume signals rather than revenue signals, which matters because two contractors at identical revenue can carry completely different paperwork loads.
- Certified payroll every week. WH-347 and state equivalents by hand stops being viable fast, and errors here hold payments.
- AIA billing across enough contracts that assembling continuation sheets manually consumes days per cycle.
- A WIP schedule that has outgrown the spreadsheet, particularly once someone other than you needs to read it on demand.
- Multiple entities, or payroll in more than one state.
- Retainage across enough contracts that tracking it outside the system has become its own risk.
What to Ask a Vendor
- Show me a work-in-progress schedule produced from job cost data, not typed in.
- Show me a G702 and G703 generated against a schedule of values, and show me what happens when a change order is approved mid-contract.
- Show me retainage reported separately from current receivables and aged by contract.
- Show me how labour burden is applied, and whether the rate can differ by class.
- Show me committed costs on open purchase orders inside job cost reporting.
- What does implementation actually require from my team, in hours, over how many weeks?
That last question decides more implementations than the feature list does. Software that would answer everything perfectly and requires attention you do not have during a busy season is not the right software this year.
Timing
Avoid migrating in the middle of a large job, and avoid it in the run-up to a prequalification or bonding request, because the comparative reporting either side of a cut is awkward for a year and that is exactly the period an underwriter will be reading.
A year end is the natural boundary. What matters more than the date is that the job cost structure is decided before the migration rather than during it. The reporting it should be producing is covered in the four numbers every commercial contractor should see every month.
Frequently Asked Questions
Can QuickBooks handle construction accounting?
For many commercial subcontractors, yes, provided it is set up for job reporting rather than for a tax return. It will carry job costing, AP, AR and payroll, and it will produce job profitability once the chart of accounts and item list are structured properly. What it does not do natively is percentage of completion revenue recognition, a work-in-progress schedule, AIA G702 and G703 formatted billing, or certified payroll. Those are usually handled with an add-on or outside the system, and the volume at which that becomes painful is what tells you it is time to look at something else.
When should a contractor move to dedicated construction software?
The usual triggers are volume rather than revenue. Certified payroll on public work, because doing WH-347 and state equivalents by hand every week stops being viable quickly. AIA billing across enough contracts that assembling continuation sheets manually is consuming days. A work-in-progress schedule that has outgrown a spreadsheet. Multiple entities or payroll states. Any one of these is a better signal than a revenue threshold, because two contractors at the same revenue can have completely different paperwork loads.
What should construction software actually do?
Five things. Cost-code job costing that reconciles to the field, including labour burden and equipment. Percent complete and over or under billings from that data. AIA G702 and G703 billing tied to an approved schedule of values. Retainage tracked by contract and reported separately from current receivables. And certified payroll where you take public work. A product that does the first two well and integrates for the rest is usually a better fit for a growing sub than a full ERP nobody has time to implement.
Why does my job costing not match what happened in the field?
Almost always because of coding discipline or missing burden rather than the software. Costs coded to the wrong job or the wrong phase, labour costed at bare wage without payroll taxes, insurance and workers compensation loaded on, equipment used but never charged to the job, and committed costs on purchase orders that are not visible until the invoice arrives. All five are setup and process problems that follow you to whatever product you migrate to.
Is it worth changing systems mid-year?
Usually not unless something is actually broken, and rarely worth it in the middle of a large job. A migration consumes attention during the period it happens and the comparative reporting either side of the cut is awkward for a year. The stronger sequence is to fix the chart of accounts and the job cost structure where you are, run it for a period, and migrate with a clean structure already proven. Moving a broken structure into better software reproduces the problem at higher cost.
Buy for the Job You Cannot Do by Hand
Most contractors do not have a software problem, they have a structure problem: a chart of accounts built to produce a tax return rather than to report on jobs. Fixing that inside the tool you already have beats migrating to a bigger one. When you do outgrow it, the trigger is usually certified payroll, AIA billing volume, or a WIP schedule you cannot assemble in a spreadsheet any more.
About the Author
Tom Woolley, MBA
Tom Woolley is a fractional CFO who spent six years running job costing and logistics in construction before founding Today CFO. He works with commercial subcontractors and small general contractors on the reporting a GC and a surety actually read.
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