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 and 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 the best QuickBooks version for construction companies?
What do construction companies usually want to automate with software like QuickBooks?
Construction accounting is different from G/L accounting in that the financial tracking is on the project level. In addition to the accounting cost code, the project and job costs are also stored in an ideal case. This data granularity is very valuable in estimating future projects since the previous data is easily accessible.
Our blog has a detailed article about construction accounting that will give you a better overview of the differences.
Job costing and estimating
In short, in addition to tracking a company’s general financial performance, the performance of each job and project is also tracked. Job costing is often used to describe the process of construction accounting. It can be used to estimate a new project and add 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 the costs incurred by suppliers and subcontractors are enormous. That is why it is vital to keep track of the cash flow. If your suppliers send you invoices for a more significant amount than you billed your customer, you will be in trouble. This is precisely the reason why many general contractors have gone bankrupt.
In addition to tracking the past cash flow status, planning your future cash flow is essential. You need to know in advance to react to the need for more cash.
Budget and profitability forecasting
In addition to tracking past performance and the final job costs, ensuring you’re within budget is also essential. Especially now that prices for materials can increase by more than 20% in a single month. If you do not track which jobs and materials have increased in price since you budgeted, you’ll be in for a sad surprise when the project ends. That’s why construction companies want to forecast costs before they even happen.
Which QuickBooks versions exist for construction companies?
QuickBooks Online (QBO)
QBO is the newest and most user-friendly version 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 can add up to 25 users, depending on your package.
What is it good at?
Besides being the most user-friendly because it is cloud-based, it also has a strong case due to the app store. If QBO does not cover your use case, there might be a specific application that QBO interfaces with. You can send only the relevant info to QBO and keep your non-accounting tasks in a program that does its parts well.
All new updates released for QBO will show up in your environment immediately. You do not need to update your software to receive the updates manually. 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 in 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 make 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 is that the base information before QBO is potentially not in a structured or collaborative format.
There is also no budget management, construction workflows, or financial forecasting. It’s good for getting an overview of the economic status of the past, but it doesn’t help with planning for the future.
You can see how Planyard can help you with construction-specific workflows and reports while sending relevant data to QBO.
QuickBooks Desktop (QBD)
QBD is one of the more feature-rich editions of QuickBooks. It is usually more developed and suitable than the online version if you have very complex accounting needs. 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 purchasing one subscription. The only limitation is when you need to look at the data in a consolidated way, and QBD doesn’t offer a good solution for that.
All of the features in this package have been developed for quite some time. Thus, they are very detailed and cover the needs of most users. If you have a construction business, you can do job costing on project and job levels with relative ease.
What is it bad at?
First, 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 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, 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 revert to using Excel for most of their workflows.
QuickBooks Desktop Contractor edition
QBD Contractor is a buffed-up version of QuickBooks Premier that only focuses on construction contractor businesses. It is precisely 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, it is an excellent tool for general contractors and subcontractors to calculate job costs. The workflows in this tool are specifically meant for job costing, and they ensure that the costs are not lost and that they are accounted for.
It is also suitable for companies tracking their material usage and project costs. Plus, it also helps construction companies with multiple crews and needs to see the profitability on different levels of the projects.
What is it bad at?
Like QuickBooks Desktop, it is locally installed software. Therefore, you only have to explicitly buy licenses for each user and install them on each computer.
In contrast to QBO, it isn't easy to find experienced accountants 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 certainly 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. It is pretty hard to beat since it is cloud-based and integrates with so many other tools. All other editions seem like a waste when you factor in community support and friendly pricing.
The most feature-rich
The version with the most features is QuickBooks Desktop, which has many features 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. We propose using Planyard for job costing and QBO for G/L accounting. We have a QuickBooks job costing integration that is easy to set up and sends all relevant accounting information to QBO while leaving all 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 thorough job cost info is in Planyard.