0401: Hidden Costs When Choosing The Right Construction Accounting Software

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By Randal DeHart and Randal DeHart | Construction Accountant |PMP | QPA. Discovered by Player FM and our community — copyright is owned by the publisher, not Player FM, and audio is streamed directly from their servers. Hit the Subscribe button to track updates in Player FM, or paste the feed URL into other podcast apps.
This Podcast Is Episode Number 401, And It's About Hidden Costs When Choosing The Right Construction Accounting Software

Typically, in the first month of the year, many contractors with expensive high-end construction software are re-examining if QuickBooks for Contractors is all they need and if switching over to it makes sense.

I chat with Contractors every day. You tell me your stories - about your challenges in running a business, keeping up with the bookwork, estimating and bidding jobs, doing the work and collections from clients, and having or not having employees and paying their taxes.

The first thing we ask is which of The Four Types of Contractors best describes your company?

Salt of The Earth

Dog And Pickup Truck

Professional

Enterprise Level

Having used several high-end construction software programs costing over $60,000 and a few low-cost programs under $500 like QuickBooks and Peachtree, and some free online bookkeeping programs, I have concluded that for contractors with annual sales volume under $5,000,000, the only answer is QuickBooks For Contractors. For an in-depth comparison of QuickBooks versions, click here.

We started using QuickBooks when it was first released in the DOS version in the early 1990s and had been raving fans of it ever since. It's had problems and growing pains; however, Intuit, the parent company of QuickBooks, is right about finding and fixing the issues as evidenced by the number of contractors using it compared to their competitors.

What are the five things to consider?

1. Setup

This is the most critical and least understood part of the selection process. A correctly set up QuickBooks contractor file will do everything a contractor with less than $5,000,000 in sales will need, including generating reports for:

  • Monthly And Quarterly Tax Returns
  • Sales Tax Returns
  • Payroll Processing
  • Payroll Tax Returns, 941 and 940
  • Contractor Invoicing
  • Work In Progress (WIP) Reporting
  • Preparing Pay Application Invoicing For Remodel
  • Preparing Pay Applications For Tenant Improvement (TI)
  • Job Deposit Tracking
  • Retention Tracking
  • Insurance Audit Support Service
  • QuickBooks Financial Reports
  • Job Costing Reports
  • Five Key Performance Indicator Reports for monitoring your business
  • And more

Setup is the most expensive hidden cost of all. Anyone who suggests the average contractor can buy construction software and have it up and running in less than 200 hours in a span of several months is stretching the truth. There is a big difference between selling construction software and setting it up to use it.

QuickBooks Setup Has Three Main Phases: Chart of Accounts, Item List, Customers, Vendors, Employees, Payroll; Clean up the existing data; and input the behind transactions.

You can do it yourself = 200 hours x $10 an hour you could earn flipping burgers (opportunity cost) adds $2,000 to the value of the software.

Give it to your bookkeeper = 200 hours x $25.29 (Paid $15.00 per hour plus taxes and overhead) adds $5,058 to the software's cost.

In most cases, you can outsource the complicated and costly QuickBooks Setup and Job Costing Reports to us, get it done right in a fraction of the time and cost of any other option, and we can clean up QuickBooks existing data and input your back-work or as we call it QuickBooks Catch-Up.

From our extensive knowledge base of Construction Accountants and studying highly profitable contractor's QuickBooks setup files, we have developed a library of QuickBooks for contractor modules to build your custom QuickBooks Contractor files in a fraction of the time and at a lower cost. It has made us the leader in setup QuickBooks for Contractors.

2. Bloat

The more the software costs, the more bells and whistles it has or, as I like to say, "bloat." Software bloat in construction is deceiving because it looks like something you've got to have or you are missing out; the good news is you're not. It merely adds fluff and filler to jack up the price, just like college and university textbooks sold by the pound.

3. Construction Bookkeepers Talent Pool

The more expensive the construction software, the more dependent you will be on the developer for tech support and training.

When you pay $1,000 for two days of training for your bookkeeper and their time 16 hours x $25.29 = $404.64 plus lunch $10 x 2 = $20 and parking $10 x 2 = $20 for a total of $1,444.64, they have increased skill sets, and they will ask for a raise or seek employment elsewhere!

Worse yet, what if you don't pay for training and they learn by trial and error on your payroll? Do you know What Ten Minutes A Day Costs Your Company?

4. Contractors Bookkeeping Services System

Everything in your construction company that makes money follows a process that is called "CONTROL." For example, building a new house is: Foundation | Framing | Mechanical | Roofing | Finish | Clean up. Everything in your construction company that costs money and does not follow a logical process is called "CHAOS."

Construction bookkeeping services is a system with a logical process, and when it is followed, you make money; when it is not, it costs you money.

5. Cloud-Based Construction Software

Cloud-Based Construction Software Is no longer a luxury reserved for enterprise-level contractors. Any contractor using QuickBooks Contractors desktop version can have it too.

We offer a way for you to access the full desktop version of QuickBooks Contractor with all of the built-in reports and the ability to print on your local desktop printer, email, or have documents linked to individual transactions.

You can do just about anything you are doing now with QuickBooks Contractor on your desktop except losing your data due to computer failure, weather, earthquake, flood, fire, or other disasters because it is on a secured cloud server with multiple redundant backups and power supplies.

You can even access your QuickBooks Contractor financial reports in the cloud without having to open QuickBooks.

Final thoughts

Consider these five hidden costs when choosing the right construction accounting software for your company. Have a recovery plan if the entire software crashes during updates/upgrades - this will even cost you more money. The best finish carpentry tools in a golf professional's hands without proper carpentry training will not produce anything near to what a skilled finish carpenter can. The same can be said about the best construction business consulting and accounting tools in an experienced finish carpenter's hands. And I say that with respect and admiration for everyone in construction.

About The Author:

Sharie DeHart, QPA is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on how to manage the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or sharie@fasteasyaccounting.com

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