Say you’ve grown beyond the stage of juggling a bunch of spreadsheets, and you want to have a more accurate method of tracking expenditures and income. As you grow your electrical contracting business, you may be on the lookout for great construction accounting software that helps you to keep track of your business accounts.
Accounting software will create invoices and keep track of important expenditures like materials, costs for your office, and your employee labor. Most types of accounting software can generate reports that give you some insight and understanding of your overall profitability so that you can manage the financial health of your business.
But with so many accounting packages are the market, how do you choose the best accounting software for electrical contractors?
What features should you look for and what pitfalls should you avoid?
First things first.
Is QuickBooks for Electrical Contractors?
QuickBooks® can be great for electrical contractors when you’re starting out. It can help you get organized by giving you a way to track payments and expenses in one place. But as you grow your business, you may find that using an off-the-shelf accounting program like QuickBooks® means that you’re spending more time creating workarounds and trying to remember to add details that should be automated, instead of getting the electrical contractor specific help you need so that you can grow your business and feel confident about your accounting software.
Here are some common pitfalls of using QuickBooks® for your electrical contracting business and how to avoid them.
Insufficiently Detailed Job Cost Reporting
QuickBooks® doesn’t provide job cost reporting, which means that you’re likely waiting until the end of the job to tally your actual costs. Waiting to see how your actual costs stack up against your budget can mean that money is falling through your fingers.
You need accounting software that can give you the details you need to see, like how many switches were actually used on the project, compared to your budget, or how your costs compare to your earned income. Proper job cost reporting should show you exactly how your job costs stack up so that when necessary, you can make decisions to course correct to preserve your profit.
Manually Creating Progress Billing
Most contractors use progress or AIA billing throughout the duration of a project so that they can continue to get paid for their labor and the materials they must purchase. But because QuickBooks® doesn’t handle progress billing, you may be forced to make the calculations and fill out complex forms yourself.
Manually updating invoicing totals in your accounting program and separately tracking retainage totals as the job progresses is risky for contractors because it can result in unnecessary errors that are tough to correct. Without accounting software made for contractors, you’re more likely to make improper percentage calculations, or forget to include approved change orders. You may end up underbilling or overbilling as a result.
Your accounting software should have built in retainage tracking that updates your Accounts Receivable and integrates Change Orders automatically so that you don’t have to remember to make the updates. You should also choose an accounting program with built in AIA forms to make everything easier and faster.
Certified Construction Payroll
How do you currently handle your certified payroll? With a workforce that works multiple jobs, with different pay rates, and sometimes in different states, construction is an industry unlike most others when it comes to payroll. Trying to modify a regular accounting program like QuickBooks® to make sure you calculate an accurate payroll that includes payroll burden like unemployment benefits, can be complicated and time consuming. And that’s not even including the other necessary calculations, like for union dues and prevailing wage calculations for contractors who work on Federally funded projects.
Your accounting software should build in the flexibility to manage all of the complexities of construction payroll. You need software that allows you to enter employee time once and updates and distributes the information to your job costs, while calculating payroll taxes and payroll burden, worker’s compensation as well as union contributions.
Integration with Your Electrical Contractor Software
Electrical contractors use a variety of software for electrical estimating, electrical plan takeoff, T&M billing, electrical materials pricing, and more. Does your accounting software integrate with these solutions?
Accounting software that integrates with your existing software and can handle data exports will greatly improve your office workflows. Easier job cost reporting, faster billing of T&M service work, and confidence in material and labor pricing provides the business intelligence you need to grow your business and increase your profit.
Construction Accounting Software has Features that QuickBooks® Doesn’t Have
Electrical contractors who are growing their business need accounting software that has features to handle the specific needs of the construction industry.
- Integrated Job Costing so that you always know how your income compares to your costs, which means you can make informed decisions to manage your business better.
- Progress billing that tracks your retainage and updates your Accounts Receivable and allows you to fill in the built in forms so that you can invoice more quickly and accurately.
- Certified payroll that meets State and Federal taxation requirements, handles union fees, and labor burden, and which also updates your job costs so your budgeted and actual costs are always visible.
If you’re using QuickBooks® to handle the accounting for your electrical contracting business, it’s a good time to ask yourself whether the software will grow with you.
Our recent webinar with construction accounting industry expert Dee Golden has more information on 7 Pitfalls of using QuickBooks® & How to Avoid Them.
Here are some examples of construction accounting software that are made for growing contracting businesses like yours: