Construction Accounting–Do You Trust Your Numbers?
When you look at the reports and information that you get from your accounting system, do you trust the numbers? Do the numbers give you the information you need to make decisions, or do they just raise more questions? Unfortunately, many contractors don’t trust the numbers they get from their accounting system and they waste a lot of time chasing down information, reconciling different spreadsheets, and keeping their own “information systems” outside of the accounting system.
When we run into contractors who don’t trust the numbers, more often than not they are using a general, “off the shelf” accounting package rather than a contractor specific system. It’s not that off the shelf accounting packages are untrustworthy, it’s because other “solutions” have to be bolted on to these systems in order to track the information that is vital to running a successful contracting business.
Let me explain what I mean. Contractors need job cost information and they have special payroll information needs. Most off the shelf accounting packages don’t address these two vital areas – at least not to the degree needed by contractors. So the solutions that get bolted on are typically spreadsheets. Creating a spreadsheet for a single job seems easy, but that approach doesn’t scale very well. Every time you add an additional spreadsheet you have another set of data to enter and update. Spreadsheets tend to be shared, copied, and edited. This leads to the dreaded meetings were a majority of the time is spent trying to decide who has the correct, up to date spreadsheet.
Some contractors try to solve this problem by having one person in charge of the spreadsheets. Unfortunately, this ends up creating a situation where the numbers may be more trustworthy, but the bottleneck created makes it hard to get decision making information in a timely manner.
For most contractors, the hidden cost of chasing, reconciling, and waiting for the correct numbers far out weigh the cost of investing in a contractor specific accounting system. Your accounting system shouldn’t be creating more work for you. It should give you the information (and the confidence) you need to run your business, your projects, and your payroll with efficiency and accuracy.