QuickBooks and construction

QuickBooks by Intuit has various options for construction companies that they could use. They range from general desktop versions to contractor-specific versions, to cloud-based online versions. Before we can say which of the versions is best for construction, let’s see what are the needs of a standard construction company. After that we have this overview, can we give our opinion on what the best QuickBooks version for construction companies is.

What do construction companies usually want to automate with software like QuickBooks?

Construction accounting is different from G/L accounting in the way that the financial tracking is rather on the project level. In addition to the accounting cost code, also the project and job costs are stored in an ideal case. This granularity of data is very valuable in estimating future projects since the previous data is easily accessible.

We have a detailed article on our blog about construction accounting that will give you a better overview of the differences.

Job costing and estimating

In short, in addition to just tracking a company’s general financial performance, the performance of each job and project is also tracked. Oftentimes, the term job costing is used to describe the process of construction accounting. Job costing can be used in the context of both estimating a new project and also adding up the incurred costs on an ongoing project.

Here’s a brief article about what job costing is all about.

Cash flow tracking and forecasting

Construction companies often work on fixed schedules and large projects. These large projects also mean that the incurred costs to suppliers and subcontractors are very large as well. That is why it is very important to keep track of the cash flow. If your suppliers send you invoices for a larger amount than you billed your customer, you will be in trouble. This is exactly the reason why many general contractors have gone bankrupt.

In addition to tracking the past cash flow status, it is also very important to plan your future cash flow. You need to know in advance to be able to react to the need for more cash.

Budget and profitability forecasting

In addition to tracking the past performance and the final job costs, it is also important to make sure you’re within budget. Especially now that prices for materials can increase by more than 20% in a single month. If you do not keep track of which jobs and materials have increased in price since you budgeted, then you’ll be in for a sad surprise when the project ends. That’s why construction companies want to forecast their costs before they even happen.

Which QuickBooks versions exist for construction companies?

QuickBooks Online (QBO)

QuickBooks Online
QuickBooks Online

QBO is the newest version and also the most user-friendly since it is cloud-based. It works on any machine that has an internet connection and does not need to be installed on the system, which would increase the setup complexity. It has a monthly subscription with varying price levels and the possibility to add up to 25 users, depending on your package.

What is it good at?

Besides being the most user-friendly due to the fact it is cloud-based, it also has a strong case for it due to the app store. If QBO does not cover your use case, there might be a specific application that QBO interfaces with. This means that you can send only the relevant info to QBO and keep your non-accounting tasks in a program that does their parts well.

All new updates that are released for QBO will show up in your environment right away. There is no need to manually update your software to receive the updates. There is also a mobile app, that lets you do most of your accounting tasks on the go. QBO is the only option out of the three, that provides both of these.

What is it bad at?

Where QBO is not so strong, is the industry-specific features. It has no construction industry-specific reports or workflows. This means that you would still have to track your job costs and do progress reporting in excel or some other tool. After you go through the workflows in this other software or excel/email, you can forward the invoices to QBO. The only problem there is that the base information before QBO is potentially not in a structured or collaborative format.

There’s also no budget management, no construction workflows, and no financial forecasting. It’s good for getting the overview of the financial status that occurred in the past, but doesn’t help with planning for the future.

You can see here how Planyard can help you with construction-specific workflows and reports, while also sending relevant data to QBO.

QuickBooks Desktop (QBD)

QuickBooks Desktop Premier

QBD is one of the more feature-rich editions of QuickBooks. If you have very complex accounting needs, it is usually a more developed and suitable version compared to the Online version. According to FitsSmallBusiness.com, “You should give QuickBooks Desktop serious consideration if your business is a retailer, manufacturer, wholesaler, professional service provider, construction contractor, or nonprofit.”.

What is it good at?

You can manage your accounts across multiple companies by just purchasing one subscription. The only limitation is when you need to look at the data in a consolidated way. QBD doesn’t really offer a good solution for that.

All of the features in this package have been developed for quite some time and thus are very detailed and cover the needs of most users. If you have a construction business, you are able to do job costing on project and job levels with relative ease.

What is it bad at?

First of all, there is no extensibility – you can’t easily integrate with other modern cloud tools. So if QBD does not do what you need to have done, you’re kind of stuck.

A second issue is that as a construction company you can’t easily onboard your site or project teams to QBD as the license costs are very high. In addition to that, it doesn’t really make sense that your team members who are focused on construction now have to learn how to use this feature-rich (and thus probably complex) tool to get their work done. It is more likely that people will rather revert to using Excel for most of their workflows.

QuickBooks Desktop Contractor edition

QuickBooks Desktop Contractor 2011 version

QBD Contractor is basically a buffed-up version of QuickBooks Premier, but just with the focus on construction contractor businesses. It is exactly meant for general contractors or subcontractors who spend a lot of time tracking the cost of each job and project.

What is it good at?

As mentioned just before, it is a great tool for job costing for general contractors and subcontractors. The workflows in this tool are specifically meant for job costing and it makes sure that the costs are not getting lost and that they are accounted for.

It is also good for companies that want to track their material usage and material costs in their projects. Plus, it also helps with construction companies that have multiple crews and need to see the profitability on different levels of the projects.

What is it bad at?

Just like QuickBooks Desktop, it is a locally installed software. So you only have to explicitly buy licenses for each user and install them on each individual computer.

In contrast to QBO, it is quite difficult to find experienced accountants who are willing to work with the desktop versions of QuickBooks. The online version has a lot of community and professional accountant support behind it, which this version for sure lacks.

Conclusion – which QuickBooks version is the best choice for construction businesses?

The most modern one

The best option would be to use QBO at this time. Since it is cloud-based and that it integrates with so many other tools, it is quite hard to beat. When you factor in community support and the friendly pricing, all other editions seem like a waste.

The most feature-rich

The version with the most features is QuickBooks Desktop, which has many features meant for the construction industry. The clear downsides of this version are that there is no marketplace, no modern integrations, and the pricing structure is not friendly for larger teams.

Our recommendation

Since the conclusion is that no modern QuickBooks version properly provides everything needed for construction, we recommend using matching tools for each job. Our proposal is to use Planyard for job costing and QBO for the G/L accounting. We have a QuickBooks job costing integration that is very easy to set up and that sends all relevant accounting information to QBO while leaving all of the detailed info accessible in Planyard. You will only need a limited number of user accounts (and accounting accounts) in QBO since all of the detailed job cost info is in Planyard.

Still using QuickBooks Online for budget management and job costing?
There’s a better way.

QBO is not the best way for managing job costs
  • It’s difficult to see what the costs consist of;
  • You can’t easily separate costs on the project and job level;
  • There’s no real-time overview of profitability forecasts;
  • It means duplicate work for PMs and accountants.
Planyard saves time and nerves

Follow your budget in real time and take immediate action when errors occur. Job costs are organized, and fully searchable and accessible for forecasting, project management and more.

Free 14-day full-featured trial. Full access. No credit card required.

All approved costs get sent to QuickBooks Online automatically after you approve them in Planyard.