Your financial game plan

Here are the nine must-have
accounting software features

BY MIKE ODE

Like Little League vs. major league, there are significant differences that separate accounting applications for the construction industry. This series covers the must-have features of construction accounting software.
The first is Job Cost Reporting. Job costing is what every contractor needs to simply stay in the game. And when contractors take job costing to more advanced levels, it can lead to better estimating, greater profits and improved long-term growth.
Unfortunately, not all accounting systems offer contractors the job cost reports needed to succeed. Generic systems lack the ability to track detailed job costs, forcing contractors to rely on spreadsheets and manual methods to prepare reports. In contrast, construction-specific accounting systems track job costs (by job, phase, activity or cost code) so that
an unlimited number of job cost reports are possible.
No matter how job cost reporting is used, or how extensively, it is bound to have a positive impact on a construction company’s bottom line. Consider the following scenario of three contractors that are similar in size and revenue.
John’s Excavating upgraded to a construction accounting system in order to track labor, material and subcontractor costs, and monitor actual vs. estimated costs. Each week, John reviews a standard job cost report that shows total costs by job. Now he can identify which jobs are making money and which are not… and he no longer operates his business in the dark.
Dan’s Excavating seeks greater details through job cost reporting. In addition to tracking costs by job, Dan wants to see how job costs break down by individual cost code. Using a job cost accounting system with flexible job cost coding and tracking, he can see demolition, site preparation and other cost codes broken down by labor, material, and subcontract costs. This allows Dan to identify precisely which area of his job is exceeding expectations or underperforming.
Bob’s Excavating takes an even more aggressive approach to job costing. In order to see how each crew is progressing, and to help project their costs on a daily/weekly basis, Bob creates production reports through his job cost accounting system. He simply enters quantities completed along with labor hours, and the software automatically calculates quantities completed per man hour (e.g., 10 sf/hour) or how much it is costing per unit of measure (e.g., $2/SF). He now has the information to forecast total job costs and calculate percent-complete. Better yet, accurate historical data will allow him to bid more precisely – and profit – on future jobs.
So what specific job cost reporting features should contractors look for in their accounting software?
Job cost detail: From simple jobs to complex, the key to efficient job costing comes down to how costs are defined and tracked. Good job cost software allows for flexible job cost detail. Users should be able to define any number of phases, cost codes and cost classes so that they can record and report data as precisely as they need it.
Reporting flexibility: Good systems provide hundreds of standard reports and make it easy to customize reporting with built-in report writers. Report writers/designers should be easy to use and powerful, allowing users to create their own drill-downs, equations, what-if scenarios and more.
Ease of Integration: A major timesaving feature is a system’s ability to seamlessly integrate with third-party products such as estimating, remote timecard entry and project management applications.
Date sensitivity: This all-important feature allows any report – in job costing or any other module – to be run for any time period, even months or years in the past.
A powerful database: How and where data is stored also has an effect on reporting capabilities. Aside from data security, Microsoft SQL, for example, offers querying capabilities via Excel and other Microsoft products. That’s like having another report writer!
Any contractor who is intent on creating a long-lasting and profitable business must understand the numbers behind their jobs. Good job cost accounting software makes it possible… and a whole lot easier. BXM
Mike Ode is President of Foundation Software, Inc., developer of FOUNDATION construction accounting, project management and scheduling software. He can be reached at 330-220-8383 or mode@foundationsoft.com. For more information, visit www.foundationsoft.com.