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What’s So Different About Accounting for Contractors?

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As we all know, having an accounting system is a vital piece of any successful business.  An accounting system provides an automated and easy way to track how much money you are making vs. how much money you are spending.

Creating proper accounts  in your accounting system to track your businesses Assets, Liabilities, Equity, Income, Cost of Goods Sold and Expenses will allow you to see an overall picture of your company’s worth or value from a financial standpoint – not only for yourself but also when you apply for a loan or have to be bonded.

A construction company, like any other company, has numerous responsibilities – to their employees, customers, vendors, subcontractors, investors and even the government.

This is where the similarities end!

The construction industry has some very specific accounting requirements.  In addition to payroll, Accounts Receivable, and Accounts Payable functions, they need to be able to have systems  to handle job costing, overhead, billing and/or invoicing, and if you use  QuickBooks for your basic accounting you’ll also need integrated applications to handle project management, scheduling, customer management, etc.

No two contractors will have the EXACT same need for functionality OR use the exact same cost coding system for billing.  So don’t let anyone tell you that every contractor uses a specific Chart of Accounts or Cost Coding system.

A typical construction specific accounting program (which carries a big price tag) includes Accounts Payable, Job Cost management, Accounts Receivable, payroll (including Union payroll), detailed job budgets, time and material billings, general ledger, AIA billing, subcontract status, custom job reports, certified payroll, over and under billings, purchase orders, Union reports, inventory, equipment tracking, work in progress, Retainage Receivable, Retainage Payable, etc.

There are many software packages available for the construction industry – ranging from $5,000.00 to $50,000.00 in price with expensive annual updates that do not include any support.  Because of this, especially in this tight economy, more and more contractors are looking at switching to QuickBooks Pro, Premier, or Enterprise to fulfill their bookkeeping and accounting needs.

QuickBooks, while not specifically developed for the construction industry is:

  • extremely user-friendly
  • can provide a very strong accounting structure “backbone”
  • can be operated by personnel who have little computer knowledge (bookkeeping and accounting knowledge, however, is important – you need to know your “debits from your credits”)
  • and with the use of reasonably-priced QuickBooks integrated applications to provide some of the higher level functionality

All of these items combined make QuickBooks when used in conjunction with 3rd party integrated applications a viable and cost-effective choice for most contractors.

2 Responses to What’s So Different About Accounting for Contractors?

  • One thing good about a construction accounting software, like
    Sage Timberline Office which we’re using, is that it has an assortment of customizable modules which are very helpful in accomplishing the related task, with the contractors benefiting from its efficiency and accuracy.

    With the the construction-related tools at hand (we’re having a Sage Master Builder support for our tools), accounting and management have never been this easy.

  • Pingback: What#39;s So Different About Accounting for Contractors? | Sunburst … — Accounting Blog

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About Your Host:

Nancy Smyth, Certified QuickBooks ProAdvisor

Nancy Smyth, Sunburst Software Solutions, Inc.
QuickBooks Construction & Payroll Expert


I've been using and supporting QuickBooks products since the early 1990's. I've worked with thousands of contractors, assisting them with QuickBooks setup, Certified Payroll Reporting requirements, AIA Billing and Weighted-Average Overtime.


QuickBooks is a powerful product, but learning how to use it in your construction business can be difficult. I hope you find resources available here to be helpful.

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