Top 3 accounting challenges for contractors and how to overcome them
Most contractors feel more comfortable getting their hands dirty on a job site than they do in a back-office crunching numbers. As painful as it can be, having a robust integrated job cost and accounting system is critical for the success of your business. And it can be painful.
Many contractors struggle with job costing, redundant data entry and unintuitive, one-size-fits-all accounting solutions that don’t offer the unique capabilities contractors need. But there is a better way. From determining job profitability to tracking cost and getting paid by ensuring all AIA forms are completed properly and efficiently, here are the three biggest accounting hurdles contractors face and why upgrading your accounting software could be the answer to your problems.
The biggest accounting challenge most general and specialty contractors have is trying to answer a simple but critical question: Did I make money on the job? Typically, this is estimated and tracked outside of the accounting system on spreadsheets. Many times, the spreadsheet is missing the data, and who really knows how much they actually made?
This process can be challenging because of the complexity of the construction industry. But the real reason contractors struggle is because many popular accounting systems don’t provide the detailed level of cost tracking that contractors need. By not being able to quickly see where the job ran over the estimated cost and then drill down into the details, contractors are left to put the pieces together themselves to get a complete accounting of the project and determine profitability.
In order to make profitability analysis faster and easier, you need an accounting solution that offers seamlessly integrated, robust job cost tracking features. Consider upgrading to accounting software that offers multiple work categories and cost codes that can be personalized to your specific type of jobs. You should be able to view estimated hours, estimated costs, actual hours, actual costs and even purchase order commitments in one easy-to-use interface. Look for software that helps protect your cash by providing an easy way to pay vendor invoices based on job, not what you owe them.
The software should then be able to provide a complete financial summary so you can view transaction details in one easy-to-use interface. This will allow you to keep better track of all your costs and determine profitability faster. The ability to view these details as the job is in progress can make the difference in whether the job is profitable or not. Simply put, having better job costing capabilities is the first step to ensuring every project you complete benefits your bottom line.
Creating required forms and document management
Many general contractors operate under the AIA billing format, which dictates specific forms like the G702 and G703 to track and process payments and other financial data. As anyone who has worked with this kind of billing knows, it can be labor intensive to create these forms. Manually filling out these forms and tracking them leaves lots of room for error and is very time consuming.
Gravity Software® makes the process easy to generate AIA forms by automatically populating fields with data stored within your accounting system. This reduces the time it takes to create these forms so you can focus less on paperwork and more on getting paid. If you’re a contractor that’s requires these forms, this streamlined process allows you to focus more of your energy on running the jobs and revenue-generating activities. This also gives you and your team more time to analyze your job history for future construction bids.
Streamlining your operation
Too often, contractors aren’t able to view a job’s profitability and the actual cost and time spent on various work activities in a comprehensive way. That’s because many contractors using basic accounting systems don’t have the functionality, they need to analyze data in real time. This disconnects financials from the actual project, pushing profitability analysis and other critical functions back until after the work has been completed. This obviously creates a lot of risk in regard to profitability. So, contractors need accounting software that allows them to quickly view complete job profitability details in one easy-to-use solution.
Gravity makes it easy to achieve this kind of comprehensive view by automatically updating jobs when vouchers are posted in accounts payable, tracking committed costs through purchase orders, and allowing you to establish processes for receiving material so you can always make sure you’re paying for the materials you received. This all happens seamlessly. Because the software is cloud-based, your project managers can access data on site on a mobile device. They can even attach any documents to a job, including drawings, change orders, agreements and quickly view them on site to make sure you’re not wasting time and resources. This can ultimately help keep costs down and increase profits. By creating a comprehensive system that integrates your financial data with the work being done in real life, you can help ensure the financial health of your business.
General and specialty contractors know that time is money, and they can’t afford to waste time on routine accounting processes. By upgrading your accounting software, you can automate many of these processes and achieve the data visibility and analysis you need to complete jobs on time, on budget and remain profitable for years to come.
Ready to upgrade your job costing capabilities? Contact Gravity Software today or schedule a demo to see how our powerful accounting solution can help contractors like you overcome financial challenges.
Better. Smarter. Accounting.