Choosing the Right Construction Business Accounting Software to Run Smarter Projects

Construction business owners and contractors understand that coordinating projects and managing budgets is a tricky balance. To ensure smooth operations, cost efficiencies and compliance, you need your systems to work for you, not against you. That’s where the right accounting tools come in.

In this article we’ll take a look at why construction business accounting software matters, key factors and features to compare and how these tools relate to business financing.

What is construction business accounting software, and how can it help you?

Construction business accounting software refers to specialised accounting solutions that cater for the complexities of the sector and the specific needs of its participants. Bespoke accounting software, or accounting tools with industry-specific integrations, help companies better manage construction projects and activities across multiple sites. 

These dedicated solutions also help ensure your employees, contractors and suppliers are paid on time – and that you’re paid promptly by clients.

Integrated software solutions combine project accounting, job costing, payroll, invoicing and expense and equipment tracking. They can sync up with your construction project management systems, monitor equipment and material usage and support industry-specific cost codes, going beyond the generic functionality offered by broad–use accounting tools.

Do I need specialist accounting software for my construction business?

While using standard accounting software is fine for new or smaller businesses, once you start taking on more projects and staff, jobs can become difficult to manage efficiently without plugins, integrations or dedicated solutions. Specialist accounting software for construction businesses offers tailored functionality to improve financial reporting, increase job costing accuracy and help you remain compliant with regulations, such as IR35 and CIS (Construction Industry Scheme).

Here are some of the main benefits of construction business accounting software:

• Enhanced job tracking and increased visibility, combining financial data with project timelines, supporting better decision-making.
• More accurate job costing and quotes to reduce the risks of project overspend and improve profitability.
• Real-time monitoring of project costs and expense management.
• Automating numerous manual processes, such as payroll calculations, change order tracking and cost allocations, to save you time and money.
• Faster billing and streamlined cash flow management, helping to minimise the impact of late payments.
• Project management integrations to help juggle multiple sites and contractors.
• Flexible technology that can scale as you grow to accommodate more projects, staff and data points.
• Easier ways to meet construction industry compliance obligations. 

Features to look out for when choosing construction business accounting software 

The best accounting software for construction businesses (and specialist integrations for existing systems) should offer many of the following features:

• Intricate project costing – advanced insights and capabilities to drill down by job, cost codes and categories (including staffing, equipment and materials).
• Change order management – enabling you to monitor, approve and bill for project changes with ease.
• Real-time budgeting using industry-standard codes to monitor performance against budget.
• Subcontractor management and compliance – automate CIS deductions to ensure tax obligations for subcontractors are met and compliance is watertight.
• Retention tracking and staged payment capabilities to ease cash flow management. 
• Integrations with bank feeds, payroll, invoices and business loans, for fast processing and a clear view of incomings, outgoings and liabilities.
• Mobile access that enables on-site staff to input timesheets, expenses and job data remotely.
• Ability to integrate with inventory and project management tools for end-to-end solutions.

What’s the best accounting software for small construction businesses?

There are various accounting software solutions available to UK construction businesses, from big-name tech providers like Sage Accounting to small business solutions such as Xero and QuickBooks. These have plug-ins and integrations for tailoring accounting systems to construction business needs, such as Tradify for Xero and Construct for Sage. You can also consider bespoke software, like Construction Manager from Eque2, which is compatible with Xero and Sage. 

Alternatively, you can leverage accounting integration capabilities in ERPs like Acumatica or project management platforms like Procore, which connect to various accounting tools, combining CRM, inventory management, payroll and financial data. 

However, when judging the best accounting software for small construction businesses, you need to work out what’s most suitable for your specific needs. So, consider what’s in your budget that matches your requirements, what works best for your existing tech, and which solutions have the flexibility to grow with your business. 

Top construction business accounting software for UK companies

To support your search, here’s an overview of some of the top construction business accounting software solutions for UK companies, including key features and suitability considerations:

Xero (with construction plug-ins like Tradify)

While this well-known cloud-based accounting solution is not construction industry-specific, Xero’s ecosystem offers various add-ons/plug-ins for companies and contractors in the sector. You can connect the likes of Tradify, Fergus and other inventory and project management apps, and integrate with banks and HMRC for easy tax submission and payment processing.

Key features

• Simplified job costing
• Time and expense tracking
• Billing, invoicing and payroll (including automated payment reminders)
• CIS management
• Mobile access

Suitability considerations:

Xero requires third-party apps to enjoy specific construction functionality and is best for sole traders and small subcontractors, as it lacks the multiple-project functionality that other options offer.

Sage 50 (with Construct for Sage)

The Construct for Sage plugin (developed by Eque2) for Sage 50 incorporates specialised construction job costing and project management features into the Sage platform, integrating with Excel, Sage Payroll, and Eque2's project management tools.

For a comprehensive construction business management platform, the Sage Construction Suite offers end-to-end cloud and hybrid ERP solutions from Sage.

Key features:

• Job costing, budgeting and forecasting
• Retention tracking
• Timesheets, expenses and payroll management
• Custom reporting tools
• CIS and subcontractor management
• Mobile app

Suitability considerations:

Construct for Sage 50 is ideal for small to mid-sized businesses and contractors using Sage. The wider Sage Construction Suite is suited to larger organisations, contractors and developers operating multiple sites that require advanced estimating and field management, plus large-scale accounting data consolidation capabilities.

QuickBooks

This popular cloud-based accounting platform for small businesses has construction-sector add-ons, like Buildertrend or Knowify, to enable specialist accounting capabilities for small to mid-sized contractors. 

Key features:

• Invoicing and cost tracking
• Automated reminders and batch invoicing
• Subcontractor and timesheet management
• Real-time financial dashboards and multi-project capabilities 
• HMRC and CIS compliance solutions through integrations
• Mobile and customised field access

Suitability considerations:

QuickBooks is a good option for growing businesses and contractors requiring flexible and scalable solutions for managing multiple projects, but it relies on third-party integrations for advanced construction functionality. 

FreeAgent

Aimed at freelancers and small businesses, while FreeAgent is not specifically for construction, it ticks a lot of boxes and includes compliance features to meet CIS and HMRC requirements, plus it easily connects with common finance tools.

Key features:

• Basic job/project tracking
• Automated CIS calculations and submissions
• Direct HMRC integration for VAT, Self Assessment and Make Tax Digital (MTD)
• Time tracking and expense logging
• Mobile app for easy invoicing and expense management
• Payroll solutions

Suitability considerations:

Ideal accounting software for small construction businesses, sole traders and subcontractors, rather than those with complex, multi-site accounting needs.

Coins (from the Access Group)

Designed specifically for the construction industry, Coins is a comprehensive ERP and accounting solution for large and mid-sized firms. Boasting integrations with Microsoft Office 365 and Power BI, plus bespoke industry tools (through APIs), it offers extensive capabilities in a single platform.

Key features:

• Job costing and forecasting
• Retention and valuation handling
• Simplified CIS and HMRC compliance
• Plant and equipment management
• Mobile app for field use
• Unified platform for monitoring and controlling project financials, operations, supply chain and subcontractors

Suitability considerations:

This powerful solution is best suited to larger contractors and developers, and includes significant implementation times and costs due to the complexity involved.

Construction Manager by Eque2

This is a purpose-built accounting and job costing solution from Eque2 designed for SMEs. It can also integrate with popular platforms like Sage and Xero, and has a mobile version for on-site needs.

Key features:

• Industry-specific job costing
• Invoice, timesheet and purchase order management
• CIS-compliant billing
• Desktop and mobile options
• Job profitability analytics and insights

Suitability considerations:

Construction Manager is an affordable and user-friendly accounting solution for small- to mid-sized contractors with good connectivity and modular features.

How much does construction business accounting software cost?

The costs of construction business accounting software vary depending on several factors, such as the range of features required, existing software you want to retain, the number of seats needed and whether you pay for tools annually or monthly.

However, subscription pricing typically ranges from £10 to £50 per month, while plug-ins can increase costs. Enterprise options can reach £100 to £200 per month and beyond, but usually this is for ERP and project management solutions with accounting integrations.

Weigh up the costs (and benefits) of an all-in-one solution vs. standalone accounting tools. Also, if you’re a small business, consider the cost savings opportunities, like paying annually, which can sometimes be as much as 20% cheaper than monthly subscription models. Plus, many tools offer discounts for sole traders. 

How to choose the right construction business accounting software

With numerous options on the market offering various features and benefits, you need to determine the best accounting software for your construction business needs, including what’s most suitable and cost-efficient.

Consider the following factors when judging accounting software suitability:

• Your business size and budget
• Your typical project types, which dictate your future requirements
• Ease of use and user experience
• Level of customer support provided
• Flexibility, scalability and integration capabilities (considering your existing systems, future tech plans and growth ambitions)
• Security protocol and accreditations
• Reputation and track record

While we offered an overview of some of the best accounting software for construction businesses, there are many emerging providers on the market. When researching providers, explore comparison sites, like Capterra and G2, look at online vendor reviews and request free trials and demos to see the tools in action. 

Avoid common mistakes when choosing accounting software for construction

• Don’t overpay for unnecessary features – so long as the solution you choose is flexible, you’ll be able to add features and plug-ins as your needs evolve.
• Adversely, ensure you map your requirements to your specific needs to avoid adopting a solution that’s missing key functionality.
• Check whether the solution can integrate with your existing systems (CRM, ERP, payroll, etc.) – fragmented systems lead to inaccuracies, inefficiencies and potential project and compliance risks
• Make compliance a priority (including CIS tracking or VAT handling) – inefficient management of subcontractor tax requirements and VAT returns can expose you to potential penalties from HMRC.
• Proactively plan for system change – inadequate training and support will lead to difficulties with software adoption and poor return on investment.

How to set up and integrate accounting software in your construction business

As mentioned, most construction business accounting software involves integrations between cloud accounting platforms, standalone digital construction accounting tools and project management systems. So, what do you need to consider when setting up your stack and creating an integrated solution?

Here are some key steps in ensuring a smooth set-up process:

• Start by conducting an audit of your construction software needs – scope out project requirements, compliance obligations, feature priorities and integrations.
• Ensure those responsible for setting up the solutions have the required accounting expertise or bring in a consultant to bridge any knowledge gaps.
• Define the types and regularity of reporting you need, such as weekly cash flow, monthly profitability and other periodic reports, plus real-time data capabilities.
• Prepare clear risk and change management processes to support smooth adoption, including proactive communication, robust testing, dedicated training and avenues for feedback.
• Plan and implement automation workflows for various key tasks, including invoice generation, payment chasing and tax deductions, before rolling out.
• Ensure bank accounts are linked and any system integrations are secure.

How to use accounting software to manage cash flow and costs

Managing cash flow is one of the biggest challenges in the construction industry, with money flowing out of your company for subcontractor payments, site surveys, material expenses, equipment maintenance, etc. Smart accounting software can help you better monitor and manage costs to prevent cash flow gaps.

Here are some ways the software can support you with cash flow management:

• Forecasting tools to predict upcoming payment gaps, allowing you to make adjustments and take key actions.
• Automate billing, track pending invoice payments and trigger reminders to reduce the number of late payments, which can cause cash flow issues.
• Real-time financial data, offering enhanced views of your cash position, upcoming expenses and payment status across multiple projects.
• Linking your income, expenses, and project budgets, which offers integrated financial insights for better decision-making.
• Providing reporting/data that can be used to secure construction business finance, where required, to address potential cash flow concerns.

Can accounting software help with applying for a business loan?

Yes. Smart digital accounting software can support your case for finance approval, helping you prove your need and eligibility for business loans and other forms of commercial funding. Real-time financial data and insights from accounting software can be viewed by digital lenders to speed up the application and approval process, or by suppliers willing to offer trade credit.

Linking accounting software to your business loan planning and repayments

Your construction accounting software can directly support your business loan planning and help you manage repayments once approved for finance. The solutions can be used to:

• Export income and expense data to provide accurate borrowing assessments.
• Provide lenders with information about cash flow, profitability, revenue potential, etc.
• Give invoice finance providers insights into client eligibility, as this is used to determine the risk of advancing payments for pending invoices.
• Track loan repayments and avoid overextending – digital lenders like iwoca have integrations with Xero, QuickBooks and FreeAgent to simplify the process.

Using iwoca’s finance solutions to support your construction business 

If you need a short-term business loan to address cash flow challenges, cover key project expenses or pay for construction business insurance upfront, our Flexi-Loans isare a great option. Applications are quick and easy, with minimal documentation required, and the loans are aligned with your needs. Plus, you can pay off the loans early, free of charge.

Get fast access to finance with approval decisions within 24 hours and same-day transfer of funds. Our solutions are designed for UK SME needs and are ideal for construction businesses. 

We also provide dedicated trade credit for the construction sector, plus our Pay Now and Pay Later solutions enable smooth invoice management (using iwocaPay).

Find out how to get a business loan with iwoca and use our repayment calculator to discover your likely monthly repayments. You can borrow between £1,000 and £1 million for up to 60 months and only pay interest on the funds you draw down. 

Sources:

• How to Choose the Right Construction Accounting Software [Acumatica]
• Construction Accounting Software Comparison [Capterra]
• Guide to Construction Cash Flow Management [The Access Group]
• Construction Industry Scheme (CIS) [Gov.uk]
• Understanding Off-Payroll Working (IR35) [Gov.uk]
• Late Payments in the Construction Industry [iwoca]
• Construction Business Finance [iwoca]

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