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Bookkeeping for contractors is much more difficult and complicated than standard commercial accounting. A contractor has to manage many different jobs simultaneously, with variable labor costs, many subcontractors, variable material costs, and the need to comply with varying regulations often all at one time. Therefore, finding the best bookkeeping software for contractors is important for a contractor to maintain their profit margin, be as accurate as possible, and allow them to grow their business over time.
In this total buyer’s guide, we will provide information on what contractor bookkeeping software is, why contractor bookkeeping software is necessary, and how to select the best contractor bookkeeping software for your construction company.
What Is Contractor Bookkeeping Software?
Bookkeeping software for contractors is a type of accounting program specifically developed for the accounting and bookkeeping needs of the construction and contracting industries. Unlike general-purpose accounting programs, contractor bookkeeping software provides support for job costing, progress billing, retainage tracking, payroll for employees of the contractor, and managing the various aspects of each of the contractor’s subcontracts.
If you are an independent contractor, a builder or a major building company, then contractor accounting software will enable you to monitor the contractor’s income, expenses, and project costs on a job-by-job basis.
Why Is Construction Accounting Software so Important?
Construction contractors have unique business requirements compared with retailers and service providers.
The following list explains why contractor accounting software is important:
- Construction Accounting Projects (by job, stage, or location) – tracking costs and profit margins on every job.
- Accurate Cost Reporting – monitoring labor, material, equipment, and overhead costs in real time.
- Progress Billing and Retainage – tracking the invoicing process of partial payment and retainage with-holdings.
- Tracking Subcontractor Payments – tracking subcontractor payments and 1099s, as well as ensuring compliance.
- Visibility into Cash Flows – identifying which projects are profitable and which projects are depleting your cash.
An accounting software for contractors together can be an operational approach and accounting platform for quickly growing organizations.
How To Evaluate Construction Accounting Software?
When you are looking at construction accounting software that works for your firm, it is important to not stop at features typical to accounting software. Your new software will need to support the daily operations of your contracting business.
Job Costing and Project Tracking
Job costing is necessary to determine profitability per project rather than per company.
Progress Invoicing
A feature of construction contracts is milestone-based billing; this software must support those milestones.
Payroll and Labor Burden Costs
Labor costs can vary significantly depending upon the number of hours worked. Software must track these hours and wage amounts, as well as the related labor burden, so accurate labor costs are accounted for across all jobs.
Subcontractor & 1099 Management
Streamlines subcontractor payment processing and tax filing
Inventory & Material Cost Tracking
It helps builders manage fluctuating material costs and usage.
Integration Capabilities
Works smoothly with project management tools, payroll software, and estimating platforms.
Scalability
Your accounting software for a contractor should scale as you do.
Top Accounting Software for Contractors
| Software | Best For | Key Features | Pricing Range |
| QuickBooks Online | Small to mid-sized contractors | Job costing, progress invoicing, integrations | $$ |
| QuickBooks Desktop Contractor | General contractors | Advanced job costing, retainage, reporting | $$$ |
| Sage 100 Contractor | Mid- to large-sized construction firms | Project management, estimating, payroll | $$$$ |
| Xero + Construction Add-ons | Small contractors & builders | Cloud accounting, integrations | $$ |
| FreshBooks | Independent contractors | Simple invoicing, expense tracking | $ |
| Buildertrend (with accounting tools) | Growing construction companies | Project & financial management | $$$$ |
This chart will help narrow down the top accounting software options to fit your specific contractor business size and needs.
Construction Company Accounting Software by Business Size
Independent Builders & Small Contractors
If you are a freelancer or have a small team, cost and ease of use will be paramount to selecting an accounting tool.
Recommended Tools:
These options provide solid accounting software for builders without unnecessary complexity.
Mid-Sized Construction Company Needs
Construction contractors with many jobs in play at one time will be best served by a more complex level of cost tracking and reporting.
Recommended Tools:
- QuickBooks Desktop Contractor
- Sage 100 Contractor
These platforms are ideal as accounting software for construction contractors managing subcontractors and payroll.
Large Construction Firms
Enterprise-Level Contractors Need Full Financial and Project Integration
Recommended Tools:
- Sage 300 Construction & Real Estate
- ERP-integrated construction accounting solutions
These applications are comprehensive accounting systems for construction companies that have substantial budgets and lengthy projects to manage.
Mistakes Contractors Make In Selecting Accounting Software
Even experienced contractors can commit expensive errors in selecting the right bookkeeping application.
Choosing Generic Accounting Tools
Many standard computer programs do not have specific construction-related features (such as job cost tracking or progress billing).
Disregarding Scalability
When a low-cost solution cannot grow with your firm, you will need to migrate at a higher cost later.
Overlooking Integration Needs
Disconnected tools create data silos and manual errors.
Underestimating Training & Support
Complex software without proper support slows productivity.
Focusing Only on Price
You also run the risk of buying a cheap solution when you really needed contractor accounting functions.
Be on the lookout to dodge a few sins that many contractors make when choosing accounting software, and you could stand a good chance of discovering the best software to prepare you for future success.
Frequently Asked Questions
What is the best acounting software for contractors?
The best choice of contractor accounting software depends upon the size and type of contractor business you operate. QuickBooks Contractor editions and Sage products are popular choices for comprehensive contractor accounting.
Can I use QuickBooks as a contractor?
Yes. QuickBooks is one of the most well-known and widely used contractor accounting solutions. It gives features such as job costing, progress billing, and integration options.
Which software are construction businesses using for accounting purposes?
Commonly, construction businesses are using QuickBooks, Sage, Buildertrend, and other Enterprise Resource Planning (ERP)-based accounting solutions depending upon their scale.
Does cloud-based accounting for construction businesses have any advantages?
Yes, real-time access, collaboration and scalability, everything you get with cloud-based construction accounting.
Do builders really need their own construction accounting software?
Yes. Construction accounting software that is tailored for builders helps track job costs, materials, and profit margins from every job.
Conclusion
Choosing the proper accounting software for your contractor accounting needs will completely change how you handle your financials, track your projects, and plan for the growth of your company. The best accounting software for contractor accounting needs does more than just capture data; it gives you clarity, control and confidence over every accounting decision you make for your business.
When selecting your contractor accounting software, by knowing your company’s size, your company’s project complexities, and what you hope to achieve through your future growth, you will be able to select bookkeeping software for construction companies to support your success in your business.
