Tracking costs throughout construction projects is possibly the most important aspect of completing a project. This may seem like a simple function, but in a construction project, different entities need different financial information, and being able to track your expenses in one place and in real time can save a lot of work (and costs) later on. Lets look at some of the costs and how construction software fills the need.

Construction accounting software makes it easier to keep track of direct material purchases. Direct materials consist of basic building supplies like drywall, wire, pipes, and wood. Essentially, direct materials are everything purchased for a project. Sometimes these materials are purchased tax-free or with a builder’s discount. These items need to be tracked separately from the costs of direct labor to ensure accurate profit and loss statements.

The cost of labor has to be tracked apart from direct material costs. Labor costs can include payroll, contractor fees and sub-contractor fees. For employees, tax withholdings need to be kept track of as well as health insurance, payroll deductions, retirement withholdings, etc. Contractors are paid in a lump sum with no taxes withheld. So, these need to be kept track of separately. Industry specific construction software will have built-in abilities for mangers to keep track of all of these things. It may even allow you to export information to a payroll service.

Contract workers are a little different as companies are not required to track or even take withholding, but construction software should also have a feature to allow generation of 1099 forms for work without withholding. As with direct labor or any ledger, this software allows easy review and retrieval of information at the conclusion of the project and at tax time.

Construction businesses must keep track of services in a separate category. This need is reflected in most construction software. Services differ from direct labor because workers performing the work are actually in the employ of another business. For example, workers sent to repair rented equipment or refuel equipment might fall under service expenses. These expenses need to be recorded on their own as a direct expense.

Subcontractor expenses can be even more difficult to track properly because their fees often include both supplies and labor. This makes it difficult to see exactly where the money is going and look for ways to cut costs. With accounting software, a manager can see that X was paid to a subcontractor who poured the foundation. But it also breaks it down into supplies and labor, so that a manager can identify areas where money can be saved, such as finding a better price on materials than the subcontrator charges. Quality construction accounting software reviews will help clarify what packages are better suited for your specific needs in these areas.

All of the above mentioned things can be done using standard (not industry specific) accounting softare, however standard software is essentially a blank sheet. With construction management software, the legers and forms are pre-defined. Depending on the extent of the construction project, it still may be substantial work, but still a lot less than starting from scratch.