.svg "Group 12 (3)")
Construction accounting management is more complicated than other industries because of unique constraints like ever-changing compliance, rapid scaling, and juggling multiple projects and job codes simultaneously.
Accounting software greatly optimizes AP and payroll workflows—as well as reduces the costly errors associated with manual data entry. However, as a company’s financial scope becomes more complex, it’s fiscally beneficial to know when you’re outgrowing your current accounting software.
The following seven warning signs can help you audit your AP software ROI, so you can upgrade to a more robust financial management tool before your outdated software impedes productivity.
Warning 1: It’s Much Harder To Manage Job Costing Complexity
Each project has its own set of job costing, labor tracking, material budgets, and equipment costs to manage. As a construction company’s project volume and complexity increase, it’s much harder to process (and ensure accuracy) if current software is outdated or its features are too limited.
Accurate job costing is especially important, with the labor shortage having increased construction labor wages by 20%. Thus, construction HR managers need software that can ensure project profit projections, payroll (and even hiring and onboarding processes) are as cost-effective, efficient, and effective as possible.
For example, if your software struggles with allocating costs across numerous individual jobs or lacks features to track real-time expenses, your AP specialist could end up misreporting project profitability.
You could avoid profit losses simply by upgrading to more comprehensive (and construction-specific) accounting software. Ideally, you’ll want to look for a platform that seamlessly integrates with your project management systems, as this can help with more accurate, real-time cost tracking.
Warning 2: Poor Integration With Your Tech Stack
Bottlenecks in productivity are usually the result of poor communication—and that goes beyond how well your human team shares information with each other. If your accounting and project management software (e.g., Procore, Sage) struggle to transmit data, that’s a major sign that your current AP software isn’t scaling effectively with your business.
For example, if your accounting team has to manually enter or transfer data between two systems, there’s an increased risk of errors, delays, and inaccurate financial reporting.
If it’s time for an upgrade, look for solutions that seamlessly integrate with your current project management systems. That way you always have clear, accurate, and real-time visibility into all project finances.
Warning 3: Payroll Takes Too Long Or Has Too Many Errors
One of the most challenging aspects of tracking and managing job costing is labor. With one worker potentially working on multiple job sites throughout the week, that makes keeping job coding and processing payroll much harder. As a company grows, that means a larger, more complex workforce, different pay rates, union agreements, and compliance requirements.
Software should make processes easier, but if your accounting system can’t easily deal with multiple labor rates or lacks key features like certified payroll, or mobile compatibility, it’s a clear sign it’s time to upgrade.
When searching for a new solution, look for accounting platforms that automate or integrate with payroll processing, job costing, and compliance checks. Ideally, consider an all-in-one solution to maximize savings and efficiency.
Warning 4: Reporting and Forecasting Limitations
The bigger a construction company gets, the harder it is to have full visibility over its financial health. Using outdated accounting software can (you guessed it) make that even harder, which can cause inaccurate forecasts, inaccurate bids, and errors that hinder your profit margin.
You’ll need AP software with robust reporting features, including custom dashboards and forecasting capabilities, that provide deeper insights into your financial health.
This not only improves bookkeeping and compliance, but it also helps position your company for proactivity. With a clearer understanding of your finances, you’re more adaptable and can make more effective business decisions, regardless of market shifts.
Warning 5: Inability to Handle Complex Compliance Requirements
All construction companies must grapple with compliance restrictions. However, the larger a company grows, the greater need for accounting solutions that can navigate certified payroll, prevailing wage laws, and detailed audit trails.
Without software that offers these features, maintaining compliance becomes much harder. If you’re slowing things down with manually tracking compliance data or consistently needing to correct errors in payroll tax filings, your current system isn’t cutting it.
To make things easier, more accurate, and more cost-effective, consider implementing software that can automate processes like compliance checks, generating certified payroll reports, and simplifying audit preparation.
Warning 6: Manual Data Entry and Reconciliation Are Slowing You Down
Few things hinder a growing construction business, like manual processing. While human oversight and management are integral to efficiency and accuracy, putting too much stake in traditional data entry causes inefficiencies that lead to errors and wasted time.
The wrong (or outdated) construction accounting software causes overburdened resources because your accounting specialists invest hours (or days) manually entering payroll timesheets, reconciling accounts, and processing invoices or payments.
Believe it or not, a study by Ernst & Young found that each manually entered HR task costs US businesses an average of almost $5.
Thankfully, your construction firm can save tons of time (and money) using software with automation features. These tools can increase productivity via automated data syncing and invoice processing to eliminate manual work and reduce errors.
Warning 7: Your Software Can’t Scale with Your Business
When first building a tech stack, it makes sense to choose user-friendly, entry-level software. This early-stage operation can help you identify exactly what you need from a software solution. However, continuing to use outdated or entry-level accounting software is risky because it may not be able to adapt to a growing construction business. This can be frustratingly apparent as your company acquires larger, or more complex, project types.
One example of this is if your software struggles with an increased volume of transactions, projects, job coding, or employees.
Aside from just upgrading to more “comprehensive” software, it’s important to invest in scalable accounting software designed specifically for construction. This offers the flexibility to manage increased data as you grow.
What To Do If You’ve Outgrown Your AP Software
From inefficient workflows to ineffective compliance adherence, the signs above are a good indication that a construction company is ready for an upgrade to its accounting software. You need a solution that easily manages evolving job costing complexity, tech stack integration, payroll, comprehensive (real-time) reporting, compliance, manual processing, and beyond.
To ensure you're positioned for sustainable growth, audit your current systems to see if it’s time to upgrade to more robust, construction-specific software.
Schedule a demo to learn how hh2’s solutions integrate seamlessly with several accounting systems, allowing you to change ERPs without the frustration of changing field processes.
