Construction businesses face additional challenges compared to retailers, the service industry and even manufacturers. Not only is their environment and customer base very fluid with work dependent on other parts of the supply chain as well as material availability and even the weather, but they are often working on many projects at the same time, each of which need a proportion of both direct and overhead costs attributed to them. If you are wondering which is the best accounting software for your construction company, read on to find out why it’s such an important question and how to go about answering it.
What are the challenges in accounting for construction companies?
Wherever your business is positioned in the world of construction – at the design stage, the main build or specialist services – whether a small sub-contractor or one of the larger contractors, keeping control over your finances is vital. The key challenges facing businesses looking for accounting software for use in construction companies are:
- Large numbers of contractors and sub-contractors to manage
- Temporary, contract and short time workers meaning that payroll can be fluid and complex
- Equipment and tools, both owned and hired/leased
- Purchasing for stock, for one-off builds and for multiple builds
- Staff and equipment used across multiple projects over any given timeframe.
What to look for in accounting software for construction
There are a few critical areas to consider when deciding on what the best accounting software is for construction. These include:
- Finances on the go. Unless you take a laptop with you everywhere you go or are stationed in the office permanently, you need to be able to update your records on the move. The simplest way of doing this is through cloud-based accountancy software, which allows you to record, monitor and track details from an app on your phone.
- Recording of day-to-day transactions. This needs to be straightforward to make sure you maintain daily records regardless of your busy schedule. That means recording labour costs, material costs, accounts payable and accounts receivable as they happen.
- Job costing breakdowns by project. Construction companies need to be able to allocate all expenses and monies received to a specific project, to ensure that you can track profitability, help you to quote for future work and to ensure the right level of information is available at the point of completing your tax return.
- CIS deduction calculations. The government’s Construction Industry Scheme can be a headache in terms of administration and tax returns. An automated way of tracking CIS deductions as you go takes away the hassle at the end of the financial year.
- Also required are standard features of any accountancy software such as the facility to track business expenses and allocate them (or a portion of them) to a project, and bank reconciliation. You may also want your accountancy software to handle payroll.
Accounting for construction companies: the solution
There is more than one option when it comes to cloud accountancy software, and finding the right solution for your business can be daunting. Xero is a great software application developed specifically for the construction industry. Not only does it work seamlessly on both PCs and mobiles through an app, making your finances easy to track and update wherever you are, but it ensures that your data is secure and backed up at all times. Most importantly, however, Xero has features that have been developed specifically for construction businesses, including running CIS calculations as you go, with each transaction automated so that you can get on with managing your business. You can also verify your subcontractors with HMRC directly and run monthly reports on your CIS subcontractor payments and deduction statements. Tracking codes within Xero allow you to track and report on specific projects to review progress, check against a budget and ensure that profitability is on track. In our view, Xero is the best accounting software for construction businesses, designed specifically with you in mind.
If you would like to find out more about working with Xero as the choice for accounting within your construction company, take a look at our dedicated page. If you’d rather have a chat with us then get in touch with the team at Kirkwood Wilson Accountants; we are a Xero Gold Partner with experience in working with companies throughout the building trade and would love to see if we can help you find the right solution for your business. Call us on 01704 546 000 or email enquiries@kirkwoodwilson.co.uk
