Accounting and invoicing for general contractors have always been a paperwork-intensive process, tracking a variety of construction-specific tasks like estimates, sourcing subcontractors, handling change orders, and partial-completion invoicing.
With the advent of office and personal computer technology, general contractors were able to turn to specialized onsite software to address those needs, and now with the rise of cloud-based apps and services, the options for solutions -especially for small and mid-sized businesses – have expanded rapidly.
Let’s take a closer look at what makes construction invoicing different – and difficult – and consider a few highly-regarded apps that are worth considering, not only for invoicing but potentially for the entire end-to-end construction process, from submitting bids to paying contractors to customer relations.
CONSTRUCTION INVOICING IS DIFFERENT
While most companies can rely on basic general ledger accounting, the nature of construction contracting means that costs can vary widely during the life of a project, constant change orders can alter expected revenues, and revenue recognition is usually based on partial completion milestones.
There are two key things that invoicing solutions for general contractors must take into account: job costing and retainage.
JOB COSTING
General contractors must be able to accurately track costs and revenues for a variety of projects, each with their own timeline and phases, and then connect that information with the general ledger. In the construction industry, this information can be harder to handle than for the average business. Labor costs can vary, and the same laborers can be used on different projects. The same equipment can be used on different projects as well, as can the same subcontractors.
Any invoicing solutions used by general contractors will need to be able to take this challenging type of job costing into account and be able to supply accurate numbers for invoicing.
RETAINAGE
Construction invoices are typically issued at certain stages of each project as specific milestones are reached. This is different from the average business where a product or project is complete before it is paid for. So, a general contractor’s invoicing solution must take this type of revenue recognition into account and be able to calculate the correct amount due at specific points in the project. Some projects apply a “project complete” calculation, which is generally just a percentage of the final agreed-upon price, while others use AIA Billing that uses specific forms to determine the amount of progress on a job. When choosing your solution, be sure that it can handle whatever specific method your projects use.
SOME HIGHLY RATED CLOUD-BASED SOLUTIONS
There are a variety of solutions available to general contractors, and they range from very basic for the smallest businesses to extremely complex Enterprise Resource Planning systems for very large entities. In addition, the transition to cloud-based applications is still ongoing, and there are many well-established onsite solutions that are still widely used.
For our purposes, we’ll focus on cloud-based apps that offer reasonable costs for small and medium-sized businesses and tend to offer integrations with other apps you may already be using.
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QuickBooks for Construction. QuickBooks is a very popular accounting software, but on its own it does not have important tools for the general contractor. Rather than add complexity to their basic product, the company offers a construction-specific version to bring in job costing and retainage features to supplement invoicing. There are two pricing tiers – currently $85 for Plus and $200 for Advanced – depending on your specific needs. An extra bonus for QuickBooks users is that many bookkeeping services, including BKE, offer easy integration with it.
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Jonas Premiere. This is a highly regarded construction accounting software that will not only invoice based on construction-specific needs, but also integrates project management. So rather than piecing together a variety of apps to meet all your contracting needs, you may find that Jonas Premier fulfills all of them. Customer support is top-notch and the workflows are known to be simple and straightforward. Pricing is straightforward, too: $249 monthly, or $199 a month if you pay annually.
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BuilderTREND. BuilderTREND is another example of an end-to-end contractor app, including project management, though you’ll have to use the more expensive $599-a-month Pro Plan to access invoicing and advanced reporting. One of the app’s key selling points is customer satisfaction, so if you find your current solution comes up short in this area, BuilderTREND may be something to consider. It also integrates easily with QuickBooks or Xero.
CONCLUSION
Standard accounting and invoicing software doesn’t meet the specific requirements of general contractors. It can be customized to suit, but your time and energy is much better spent on one of the new construction-specific cloud-based applications on the market today. Whether you are a small, medium, or large business, there is a solution out there that will meet your needs.