Construction Applications Definitions

Construction Accounting and Management Software - Construction accounting software performs two essential reporting functions. One is for financial statement preparation. Transactions entered into accounts payable, accounts receivable, inventory, and purchase orders issued and received are posted to the general ledger system which aggregates the data for expenses, revenues, assets and liabilities and prints the financial reports according to generally accepted accounting principles (GAAP).

The second category is for management accounting which tracks any and all costs and revenues applied to jobs to facilitate managing company projects. An example of a management accounting report is the cost to complete report for a particular job which shows all costs to date for labor and materials and projects the cost to complete the job based on an estimate of how much of the job has been completed so far.

Construction accounting software encompasses all transactions and reporting which are used by contractors. This will typically begin with job estimates as a baseline for measuring actual ongoing costs incurred from start to completion. It will account for all costs from vendors for materials and labor, whether from subcontractors or company employees, indirect company costs (AKA overhead) which is allocated to jobs, fringe benefits, certain payroll taxes and other costs. Construction accounting software will also track cash received against a job compared to payouts as well as outstanding liabilities and deferred revenues (revenues collected for future work ) which may need to be recognized for accounting purposes. The amounts for purchase orders issued, which are a legal liability, are reported as committed costs.

Job Cost Software - The job cost module is the core component of construction software solutions and has overall responsibility for tracking expenses vs. revenue as they pertain to a job’s budget and its profitability. Job cost is fed by sub ledgers such as accounts payable, payroll, inventory, and equipment which send it data for all financial information related to a project including labor, materials and overhead costs.

Job cost should offer a variety of reports and inquiries that provide overview information including initial and revised budgets by phase, actual costs to date, committed costs, expected costs to complete the project, billings to date, and cash collected to date, etc. In construction time is money. The sooner you know about problems, the sooner you can deal with them so most contractors are looking for “realtime costs” postings from sub ledgers.

Service Management - Service management is a specialized module that can part of a construction software solution for companies with significant service operations who do time and materials or maintenance contract work. Service management software in a construction business might offer a variety of functionality such as work order generation (web based or direct), service scheduling/dispatch and billing for completed work via integration with accounts receivable. The creation and management of service contracts is often part of a service management module.

Advanced service management systems might offer additional functionality such as wireless field service software, fleet management and even customer relationship management (CRM) functionality.

For comparisons on how different construction software products handle service management, download the free Construction Software Selection Kit.

Project Management/Document Control - Document management is a significant feature of project management software and is used to generate and track documents such as contracts, subcontracts, submittals, transmittals, RFIs and change orders. It provides the ability to generate, store, edit, annotate, distribute and manage documents electronically. Often used in conjunction with document imaging software to scan paper documents such as correspondence, job site photos and project plans, document control is slowly gaining popularity with construction companies.

Effective document control systems should provide a variety of security options along with scalability and a searchable database for easy document retrieval. More advanced capabilities may include work flows and electronic approvals when multiple project managers at different locations are involved.

For comparisons on how different construction software products handle project management/document control, download the free Construction Software Selection Kit.

Purchase Orders - Purchase order is a module that is typically part of construction software solutions. Purchase order software manages the ordering and receipt of goods and services from vendors. A purchase order defines what needs to be ordered and tracks what has been ordered and received against that order. Purchase Order software should offer the ability to generate electronic purchase orders directly selected by a user or using predefined criteria selected from a database. Good security must be in place to assure that unauthorized personnel are not permitted to create purchase orders.

For this module to be effective within a construction software solution, it should have an easily updatable database of cost items to draw upon. A purchase order module should be able to issue requisitions and follow them from inception to delivery of goods and services to matching invoices to payments. A purchase order receipt may also be used to automatically create an accounts payable transaction in some systems. Not every user needs functionality that is this broad, but a well integrated purchase order module should be able to perform all these functions.

For comparisons on how different construction software products handle purchase orders, download the free Construction Software Selection Kit.

Inventory Control - Inventory control manages the ordering, receiving and issuance of materials to jobs as well as what’s on hand at the warehouse or storage level. Thus module should be able to interact with invoice production, sales, purchase order and job accounting.

Inventory control must keep detailed information about the products, customers, inventory supplies, sales, purchases, inventory stock and accounts. It should produce reports that help employees monitor the inventory-related indicators of your business.

For comparisons on how different construction software products handle inventory control, download the free Construction Software Selection Kit.

Equipment Management - Equipment management software is most often used for charging equipment usage to jobs; for tracking the maintenance and repair of equipment; and for calculating the profitability of construction equipment usage (either owned or rented). Some contractors also want their equipment applications to compute depreciation for accounting purposes. Some contractors also own and rent out their own equipment and need the ability to invoice rentals and track its usage.

Equipment management should offer a flexible feature set that allows the user to set various rates (including standby) for equipment and tool usage, schedule preventive maintenance and repairs, tracks all costs associated with equipment and identify where a specific piece of equipment or tool can be found.

For comparisons on how different construction software products handle equipment manaement, download the free Construction Software Selection Kit.

Estimating Software - Construction estimating software is often part of construction software solutions, either as an add-on module or as an integrated third party solution. Estimating software in a construction business provides the ability to generate an estimate or bid for a job and establish an initial budget. Estimating software will often provide customized databases for different construction specialties, such as general vs. electrical contracting.

Although many construction companies are still using Microsoft Excel for estimating, an estimating solution provides more detail for greater accuracy of estimates. Features such as user-defined assemblies, multiple price points and automated calculations provide greater efficiencies when producing estimates. And when estimating is integrated with construction accounting software, job detail can be automatically transferred from estimating to accounting for instant setup.

For comparisons on how different construction software products handle estimating software, download the free Construction Software Selection Kit.

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