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Construction Software Buyer Guide

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General Overview of Construction Software
         What is Construction Software?
         Why should you invest in a construction software system?
         How is construction accounting software different from other general accounting software packages?
         What's the difference between the less expensive construction systems and the more expensive ones?

Related Business Types That Typically Use Construction Software
Construction Software Features and Modules
Additional Information and Purchasing Considerations
Links to Construction Software Resources and Information

General Overview

What is Construction Software?
Construction software is software designed specifically for businesses that perform work on a project by project basis and have a need to track and manage the individual costs (time, material and labor) associated with the project. Companies that are involved with construction such as specialty sub contractors, home builders, developers, engineers typically use some type of construction software. The core purpose of most construction software systems is to facilitate the function of job costing which is the process of managing, estimating and tracking costs associated with a job.  Some construction software packages are all inclusive meaning that they can track and produce all the necessary information a contractor wants or needs to have. Other packages may include only specific tasks and thus must be coupled with other types of business or construction software to be complete. The use of any one type of construction software depends on the contractor’s individual business needs.

Why should you invest in a construction software system?
While many small construction companies may get by with just a simple off-the-shelf accounting system such as Quicken and a side Excel spreadsheet to manage one or two small projects at a time, this type of system can quickly become difficult and inefficient for a growing company with multiple employees and multiple ongoing projects.  Buying a construction accounting system can help streamline the tracking of costs into a single uniform environment whereby all project costs and project details can be easily accessed and reviewed from a common interface by many different people in an organization.  Also, construction specific software has features built in that are unique to the construction industry.  For instance, the ability to pay invoices directly against subcontracts or the ability to input payroll time and have the labor related costs burdened directly against a job.  These industry specific features can make a big difference in a growing business and may be the difference between going over budget on a job and making a profit.  Here are some more common features of construction software...

- Analysis of actual costs compared to budgeted costs
- Tracking and managing the collection of revenue on jobs
- Tracking and withholding of Retention
- Insurance tracking and compliance
- Printing and tracking of lien releases
- Automatic burdening of job costs when entering invoices and timesheets
- Project management
- Tracking and purchasing inventory and material for jobs
- Estimating of project costs

How is construction accounting software different from other general accounting software packages?
Construction accounting software is actually similar in many ways to other general accounting systems.  For instance, most fully integrated construction software has all of the standard accounting features a company would expect from an accounting system such as General Ledger, Accounts Receivable, Accounts Payable and Payroll functionality.  In fact, in some cases, these accounting functions are arguably as good and even better than some of the more popular mainstream accounting systems such as Great Plains or Sage's MAS90/200 and would serve most non-construction companies needs well on their own.

This, however, is where the similarities typically stop.  Construction software as one would expect offers a whole host of other modules and functions such as:

- Job Costing
- Project Management
- Contract & Billing
- Project Estimating
More importantly, all of these modules are integrated and operate interchangeably with one another which increases productivity by providing a common interface to retrieve and enter data.  It also helps to reduce redundant data input which in turn saves time and minimizes the potential for errors.

It is also important to note that not all construction software systems have fully integrated accounting systems.  Some construction software handle only one or a few of the construction functions listed above. For instance, some systems just handle the Job Costing while others focus on just project management.  Some systems are purposely designed to integrate to other mainstream accounting systems as add-on modules to enhance the functionality of those products.  Thus, whether you purchase a fully integrated construction system or a stand alone system really depends on the individual needs and circumstances of each organization.

What's the difference between the less expensive construction systems and the more expensive ones?
Construction software can range in price from $500 to over $100,000.  The extreme low end of the scale is typically comprised of off-the-shelf solutions that are limited in functionality and usually require little installation help, training, or customization.  At the high end of the spectrum the software is typically more complicated and handles many more functions.  High end software typically requires assistance to implement, setup and train how to use.   Below we've outlined several 'not' so commonly known but important traits that differentiate lower-end construction software from the higher-end software as follows:

Multi Company Tracking: In the construction industry especially in the homebuilding industry every project is generally associated with a different legal entity which means that every project requires it's own set of financial statements, separate 1099's, separate vendors, separate job cost, etc.  In lower end systems, each company generally has to be setup in a separate data folder.  In higher end systems all of the companies are able to be setup in a single data folder that share common vendor and customer information but with the capability of differentiating all of the activity between separate companies.  Having all of the information in a single data folder reduces data input and save time from having to switch between multiple data folders to routinely access different company information

Account Structure: higher end systems generally provide the ability to setup more complex account structures while lower-end systems generally provide a very simple account structure.  Having the ability to setup a more complex account structure enables companies to more easily track information by cost centers.  For example, if a company has multiple divisions or departments and wanted to track the profitability of each division,  in a higher end systems they should be able to easily accomplish this, while in a lower end system they may not be able to do this because the account structure may not provide enough flexibility to handle this type of tracking.

Complex example: Co - Proj - Area - Base.Suffix (xx-xxx-xx-xxx.xx)

Simple example: Base.Suffix (

Multi-use: higher end systems generally allow and can handle unlimited simultaneous access to their system while lower end systems usually have a limit either artificial or physical that restricts the number of users that can access the system at one time.

Database: higher end systems generally are built around mainstream third party database systems such as Microsoft SQL Server, Oracle, IMB DB2 while lower end systems are typically built around proprietary or non-standard databases.  Mainstream 3rd party database systems generally provide higher performance, greater reliability and ensure full access to your data.

Modularity: higher end systems are generally modular whereby functionality can be added/purchased as a company grows and their needs change, while lower end systems are usually all or nothing meaning you get all the functionality the software offers for a single price whether you'll use it or not.  Modular software is appealing to some companies because they don't have to pay for functionality that they don't need or want yet they have the option to purchase it later on if their needs change.

Data Access: higher end systems generally allow full access to their data either through custom tools or via an ODBC connection while lower end systems typically do not allow access to their data other than through the user interface they provide within their program.

Report Writing: higher end systems generally provide unlimited custom report writing capabilities while lower end systems generally have a series of precanned reports that allow limited customization.  With higher end systems companies can generally customize any of the precanned reports and can build an unlimited number of custom reports using 3rd party report writing software such as Crystal Reports, SQL Reporting Services or Microsoft Access.

Common Myth: it is generally believed that lower end systems are less expensive because they do not have the sophistication or the feature sets that higher end systems have.  In the early days of computing this was more or less true, however as computing power and development tools have evolved, the reality today is that many of the lower end systems actually provide equal and in some cases better functionality and more features than higher end systems.  A perfect example of this is the evolution of Quickbooks which continues to add more and more features to their product and which often times results in post implementation blues for companies who eventually upgrade to higher end accounting systems and realize that certain tasks that used to be a click away now take longer to accomplish. Basically, higher end systems typically have more depth and handle a broader spectrum of business functions (i.e. accounting, payroll, construction, etc.) where the lower end systems usually are focused on a one or two core areas of competence (i.e. just "estimating"). 

Related Business Types

Companies that typically use construction software will fall into one of the following business categories...
  • General Contractors
  • Home Builders
  • Land Developers
  • Specialty Sub Contractors: Plumbers, electrical contractors, HVAC, masons, concrete contractors, landscapers, cabinetry makers, carpenters, drywallers
  • Heavy Construction
  • Architects
  • Civil Engineers
  • Government Contractors
  • Commercial Office/Retail Developers
  • Property Maintenance Firms

Common Modules

General Accounting Modules:

  • General Ledger: the general ledger (GL) is the central point which accumulates the results of all other accounting operations and contains all the financial accounts and statements of a business. The general ledger accumulates dollar amounts as debits or credits and the balance of all the debits and credits in the general ledger should equal zero.  All other modules in an accounting system generally point to the General Ledger.

  • Accounts Payable: the accounts payable (AP) module is where invoices owed to other companies are entered and paid.  In a good construction accounting system this module is very important because it will burden the related job cost when an invoice is entered.  This module will also evaluate the amounts invoiced against signed contracts ensuring that you don't overpay on a contract. The AP module also handles common things in the construction industry such as automatic withholding of retention, insurance tracking and compliance, and the tracking and printing of lien releases.  The AP module posts to the general ledger and normally increases or decreases a combination of an expense, liability and/or a cash related account. 

  • Accounts Receivable: the accounts receivable (AR) module is where jobs are billed for work performed and where payments are applied as they are received.  Construction accounts receivable systems also generally provide a way to perform progress billings, account for retention being withheld by the customer and evaluate billings to contracted amounts.  Good construction systems will also provide various ways to generate billings such as generating a bill based on actual costs incurred plus a markup or based on a fixed amount.  The AR module posts to the general ledger and normally increases or decreases a combination of a revenue, receivable and/or a cash related account.

  • Cash Management: the cash management module's purpose is to track all of the cash coming in and out of the business.  This module is where bank accounts are setup.  Each bank account is then generally linked back to respective cash related modules such as Accounts Receivable, Payroll and Accounts Payable.  The Cash Management module is also where bank reconciliations, misc deposits and withdrawals, bank transfers and other types of cash transactions are entered and maintained. Sometimes systems will not have a separate cash management module but will include this functionality as part of either General Ledger, Accounts Payable or Accounts Receivable.

  • Human Resources: the human resource (HR) module generally handles all of the functions associated with hiring and managing existing employees.  Sometimes this module also includes payroll but in many systems the payroll function is separated into its own module which then leverages certain information included in the human resource module to generate the payroll.  One big aspect of the HR module is "benefits administration" which is the process of tracking employee participation in benefits programs ranging from healthcare provider, insurance policy, and pension plan to profit sharing or stock option plans. It is also important to note that because HR functionality is so specialized and constantly changing due to state and federal laws and regulations many mainstream accounting systems do not have their own built-in HR module and rely on third party HR products to augment their systems.  In fact, many popular HR systems are stand-alone and can function independently of any specific accounting system but often times have interfaces to certain accounting systems to increase their marketability and penetration in the marketplace.

  • Payroll: the payroll module automates the pay process by gathering data on employee time and attendance, calculating various deductions and taxes, and generating payroll checks and employee tax reports. Data is generally fed from the human resources and time keeping modules to calculate automatic deposit and manual check amounts.  In a construction system the payroll module is very important in burdening labor costs to specific jobs.  A good construction system will automatically apply calculated payroll costs to respective jobs based on timesheet data entered.  Also, more sophisticated construction systems will provide advanced features for producing a "Union" payroll which takes into account prevailing wages, trade codes and union codes.   The payroll module in a construction system sends accounting information to the general ledger and job cost modules.

Construction Specific Modules:
  • Job Cost: the job cost module is generally the core and most important module of a construction system because this module is where costs associated with a job are accumulated, tracked and analyzed.  The job cost module is where all jobs are generally setup and maintained.  Important information such as the location of the job, start and end dates, key contact information is entered in this module.  Here is a list of other important functions and features of the job cost module...

    - Enter estimated costs on a job by job basis
    - Setup and maintain list of cost codes for categorizing and tracking job specific costs
    - Setup and maintain category codes (i.e. labor, material, subcontract, equipment, other)
    - Setup and maintain contracts for work contracted to be performed (revenue)
    - Setup and maintain sub-contracts (costs - work subcontracted out to other vendors which you are responsible for completing)
    - Print job specific reports such as Job To Date Cost Report, Committed Cost Report, Loan Draw Reports, Job Labor Reports, etc.
    - Enter and track change orders for budget, contract and sub-contract changes

  • Project Management: the project management module is where projects are managed.  Things like email correspondence, documents (i.e. blue prints, spread sheets, etc) , transmittals, submittals and any other information pertaining to a project are all electronically stored and indexed in the project management module.  Another important feature of project management software is the ability to schedule tasks and electronically notify people of those tasks.  Some systems even include gantt chart reporting and tracking.  Other more advanced systems will even allow third parties to login remotely and view the status of a project and update information as it pertains to their involvement in the project.  Project management systems allow an organization to centralize the process of managing projects, thereby allowing visibility to the status of each project from a common user interface.  It's important to also note that in some construction systems common functions of project management systems may be embedded as part of the Job Cost module and vice versa.  

  • Estimating: the estimating module is designed to help companies estimate the cost of a project.  Having an accurate cost estimate allows company's to bid projects so that they can make a profit.  Estimating software allows companies to more accurately estimate the cost of a project because it enables the users to enter the exact specifications of a job and then compute the costs based on current industry price lists and labor costs.  Some companies may find that using estimating software takes longer and is more time consuming than working up estimates in a spreadsheet or on paper but if the software is setup properly and users put the necessary time into learning how to use the software in the long run the estimating process can be accomplished faster and more accurately.

  • Contracts: the contracts module is where contracts are entered and tracked for either prospective jobs that are being bid on or for active jobs that have been awarded.  The contracts module allows change orders to contracts to be entered and is where the status and billings against a contract can be reviewed.  For developers who have construction loans against a project, this module is also where loan draw reports would be generated and prepared.

  • Service Management: the service management module is designed to help companies dispatch workers to job locations to repair and/or provide maintenance on buildings or equipment.  The service management module should track labor hours and costs associated with performing service work and provide a scheduling and dispatching component to track where employees currently are and where they need to go.  Some construction companies use service management software to handle warranty work on projects or to track the maintenance and repair on buildings that they have built and own.

Additional Information

Homebuilders: there are many unique aspects to the homebuilding industry that differ from most of the other construction related industries.  When looking for a homebuilding solution, make sure the software provides a way to account for escrow closings and tracking of 'option' costs.  Also, if you are a California homebuilder when talking to a vendor inquire how their software accounts for master planned contracts and price point billings.

Union Contractors: certain construction trades such as plumbers, electricians, heavy construction contractors use 'union' employees and therefore have different payroll and reporting requirements that they must adhere to.  If you use union employees, make sure when purchasing a construction solution that it adequately addresses your Union reporting and tracking needs. You will find that having union reporting requirements will narrow down the possible solutions available dramatically.  Fewer vendors support union payrolls because of it's complexity and limited market demand.

Land Developers: land developers buy land and prepare it to be sold and developed by others. By nature there is very little billing or revenue collection involved because the transactions are usually large and infrequent.  As such, Land developers need to be careful not to purchase a construction system that is too heavily geared toward billing and revenue collection.  Most of the construction software on the market is more billing and revenue oriented as opposed to cost and subcontract oriented.

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