3 Reasons Construction Companies Upgrade From QuickBooks

QuickBooks is a great entry-level bookkeeping tool for small businesses. Although it’s not built specifically to handle construction accounting, many construction companies use it when they’re first starting out, and some keep using it for years, even as their business grows in size and complexity.?

But modern construction-specific accounting systems have a lot more to offer. In fact, if you’re a construction company still using QuickBooks, you’re missing out on insights that could boost your profits and help you win more deals.?

Here are three areas where QuickBooks’ functionality doesn’t meet the needs of construction finance teams.

1. Construction Project Accounting?

Even though QuickBooks has some project tracking features, the software lacks the ability to track cost codes and cost types, limiting its usefulness for construction project accounting. If you can’t track cost codes and cost types, it becomes very difficult to understand whether a project is over or under budget and where to cut costs.?

To get around this limitation, many construction companies have to create separate accounts for each project to get another layer of granularity in their reporting. This leads them to having a massive, unwieldy chart of accounts, and it’s still very difficult to compare costs between one project and another.?

2. Change Order Management?

Change orders are a necessity in almost every type of construction business, and for some of our customers, change orders actually represent more of their business than initial bids. Once they’ve gotten a foot in the door with a large customer, it can be easier to manage all future work with change orders than to negotiate a new contract.?

Managing a change order involves recording the change in cost as well as the change in billing, notifying the customer of the change and getting required approvals, and billing for the changes.?

However, QuickBooks doesn’t offer any features to help with managing change orders. Because of this, many construction teams use construction management software to track their change orders, or they manage it manually in Excel. But using Excel is risky. You might not properly bill out the changes, or you might bill them late, leading to cash flow issues when you have to pay your subcontractors. And anytime you’re managing complex financial information in spreadsheets, there’s a business continuity risk if only one person in your organization knows how to read and manipulate that spreadsheet.

3. Construction-Specific Billing?

Construction-specific billing presents a lot of challenges that are unique to the industry, and unfortunately, QuickBooks doesn’t have any built-in features to help with them. Retainage is a prime example of an accounting function that’s unique to the construction industry. If you’re using QuickBooks, you have to keep a separate retainage ledger to track how much is being held back from each payment and how much gets released at each milestone. Progressive billing, a common way for general contractors to bill out large projects, is also impossible to track in QuickBooks. Lastly, QuickBooks doesn’t offer AIA-style formatting for bills. Most construction management software offers this, so many construction companies have their project managers handle the billing. But if you’d prefer to have your accounting team handle the billing directly, they’ll have to learn their way around another tool.?

Because of these limitations and others, construction finance teams who use QuickBooks deal with a lot of inefficiencies and have to rely on complicated workarounds to manage many routine operations. An accounting tool that’s purpose-built for the construction industry, such as Sage Intacct, offers features that streamline and sometimes completely eliminate all of these challenges. If you’re thinking about upgrading from QuickBooks, let’s chat.