5 Quickbooks Tips for Contractors: Construction Accounting
Quickbooks is a popular accounting software choice for a wide range of companies. Many construction firms utilize it since it is simple to use and inexpensive (it ranges from $20 to $45 per month). Quickbooks Online makes it simple to view your bookkeeping data and financial reports from anywhere and stay on top of things.
It is, at its core, a business accounting program designed for the entire business. Even their specialized program, Quickbooks for Contractors, isn't appropriate for every construction company. That doesn't mean it's a bad product to use if you're in the construction industry. It just implies that if you do utilize it, you should be aware of certain issues. We'll look at four things that the construction accounting software does well in this article and 5 Quickbooks contractor advice to make the most of it.
4 Things Quickbooks Does Well for Contractors
Let's start with four features that Quickbooks construction accounting software excels at for contractors and firms.
Job Costing and Estimating
Every construction company should be utilizing job costing to estimate income and costs for each project. Quickbooks makes it simple to set up both customers and jobs, which is fantastic. You simply provide a few data inputs and you're done. You may quickly run job costing reports if you enter or import your project estimates into the software. It can even tell you which phase of the job costs more than others. The out-of-the-box documents are very practical and easy to comprehend, and it's simple to drill down into a report to see the component that makes up each number.
Cash Flow Reporting
Contractors are highly concerned with their cash flow, which is understandable. Quickbooks software can quickly show you where your money has disappeared and where it is coming from. There are several built-in reports that make obtaining this data a cinch.
Running payroll is really simple once you've set-up your deductions, taxes, and employer-paid benefits. Enter the time, do the checks, then print them or send them to the bank for auto deposit. Reports are easy to read and understand, with all the information you need for tax back-up. TSheets is a Quickbooks add-on that includes a time clock software for construction and field workers.
Year End and Taxes
Quickbooks quickly and efficiently creates the year-end tax forms you require, such as W-2s, 1099s, and final payroll reports. There's no need for separate tracking since all the computations are done by the program.
5 Tips for Using Quickbooks Better
Quickbooks is an excellent accounting software for contractors. While the program is quite useful right out of the box, it isn't perfect. There are a few improvements that Quickbooks could make to help contractors accomplish their tasks better.
Quickbooks Tip #1: Get expert help with setup
The software guides you through a series of questions designed to make setting up your company file as simple as possible. Every contractor, after all, runs their business differently. Before creating your company file, consult with an expert. They can help you decide what your chart of accounts should include and how you should structure your balance sheet and other financial statements.
You'll also need assistance with setting up payroll taxes, deductions, and benefits. It's critical that these numbers are correct, so conduct some testing before you go live. All payroll burden costs (taxes and benefits paid by the business) are treated as overhead expenses by Quickbooks. To put those expenditures where they belong in the jobs, you'll need to collaborate with an expert.
Quickbooks Tip #2: Use pay items to account for prevailing wages
According to Quickbooks, it can handle prevailing wage projects, but in most cases, it's a question of doing many workarounds to get it right. To cover the fringes, you'll have to create different pay items for each hourly rate and other charges. The program also doesn't generate the required report format for most state or federal projects, therefore you'll need to grab the data from payroll reports and retype it into a form.
Quickbooks Tip #3: Short pay invoices to track retainage
For contractors working in the commercial construction sector, this is one of the most aggravating limitations. There's no easy method to keep track of retention you owe a subcontractor or the retainage held on your bills. Accounts Payable (AP) is a simple remedy - you underpay the invoices that require retention holding. In accounting jargon, short payment refers to paying less than the total amount invoiced. It will be brief by the amount of Retention in this example.
When invoicing customers in Accounts Receivable, you can create a billing item that corresponds to the amount of retention being saved. The correct percentage will be subtracted from the invoice by the Quickbooks program. When it's time to issue the final bill, you charge against that retention item.
When it comes to determining your Retention Payable and Retention Receivable balances at the end of the year, or after you've completed your financial statements, you'll have to do some manual calculations. Running reports and transferring them into Excel or another spreadsheet program may make these calculations simpler.
Quickbooks Tip #4: Use Excel for WIP reporting
Quickbooks isn't much help if your firm uses Work In Progress (WIP) reporting to adjust income to match real expenditures (used with percentage of completion accounting). You'll need to establish a spreadsheet to track WIP, then use Quickbooks' cost vs. estimate reports to change the totals for each job on a monthly or quarterly basis. Keep copies of the reports so you can see what data your spreadsheet is based on.
Quickbooks Tip #5: Watch out for the delete button
When someone mentions deleting a transaction, accountants everywhere cringe. You never delete anything in accounting! Quickbooks makes it simple (too simple) to remove a check, an invoice, or a journal entry, among other things. It lacks the controls that other accounting software has. In most situations, cancelling an entry with a correcting entry is preferable than deleting it. Quickbooks allows you to cancel transactions rather than erase them, as is the case with many competing programs.
The Bottom Line: Quickbooks works for contractors with some adjustments
When it comes to starting a construction company, Quickbooks is an excellent, reliable accounting system. However, there are a few things to be aware of. To ensure that it is set up correctly, get some assistance. If you use WIP reporting, begin your spreadsheet early so you won't have to revisit it later. Never remove transactions! And if you require workarounds for retention or certified payroll, learn them now. You'll be on your way to better job profitability and more accurate financial reporting with these hints.
Talk to one of our construction accounting advisors today for help in implementing QuickBooks properly in your construction company.