Will QuickBooks Online work for my Construction Business?

I was originally asked to write this article for QBOChat where it was published back on March 8th. I wanted to share it here for our readership as well (with a few minor changes.)

Have you heard it won’t?

If you are a construction company owner who has been told that QuickBooks Online won’t work for your construction business, you may want to take a second look. There are still quite a few accounting professionals who tend to think of QuickBooks Online in the same way as they view the QuickBooks Desktop software package. Don’t get me wrong, QuickBooks Desktop is still a powerful piece of software and it is still being improved upon by the great folks at Intuit. However, to truly understand QuickBooks Online you must understand the idea of SaaS, cloud computing, and app integrations.

So, what is SaaS? No, it’s not the lip that you used to give your mom and for which you were sent to bed without your supper. SaaS stands for Software as a Service. QuickBooks Online is designed to be run from the cloud and one of the major benefits of this cloud computing model is the ability for QuickBooks Online to integrate fairly seamlessly with other cloud based apps. Cloud computing and SaaS programs – “apps” – are really the future of small business management.

OK, so what?

Why, you may be asking, does this matter to me in terms of my construction business. Back to our original proposition – if anyone has ever told you that QuickBooks Online just doesn’t have enough features for you to properly manage your construction business then you should know that they’re right.

Gulp. They’re right. As a Construction Accounting Specialist, I would say that the majority of construction companies (of any size) should not attempt to manage their construction business accounting solely through QuickBooks Online. Yet, the beauty of app integrations with other cloud based software is that now you can take your accounting software – QuickBooks Online – and link it directly to your project management software – for instance, Knowify – and have all the integrated project management and accounting data be magically imported into QuickBooks Online without having to do any manual data entry from one program to the other.

Just think

Think about the ramifications of that for a second. Just a few short years ago, the various aspects of running a construction company were broken up into various parts – estimating had their software tools, project managers had their software tools and accounting had their software tools. These various software systems operated independently of one another. So, estimating would work on an estimate (say they put that together in a spreadsheet program.) Then, they had to communicate that information to the project manager and to accounting – both of whom enter the same data all over again into their respective project management and accounting platforms. As the project progresses, the project manager had to communicate with accounting information about project costs, time and materials, what portion of the job is complete, and so on and so forth.

Let’s take a walk in the cloud

Now, step into the world of cloud computing, Knowify and QuickBooks Online. With these two powerful tools integrated nearly every step of a project (no matter how complicated) can now be managed in one simple tool. Accounting still has the ‘back end’ system of QuickBooks Online for maintaining non-project related items such as payroll and bank reconciliations, but everything pertaining to the projects is now flowing through the one, easy to use system of Knowify and the accountant never needs to do double data entry work to make sense of the numbers because Knowify pushes that information into QuickBooks Online without even having to click a button. Estimating enters their estimate directly into Knowify using as much or as little detail as necessary. The project manager can manage every piece of the project from scheduling to materials invoices to billing right within Knowify. All along the way, every detail that needs to post to QuickBooks is posting to QuickBooks. The accounting department (or your knowledgeable QuickBooks ProAdvisor or Construction Company Network Advisor) can see every piece of the accounting puzzle as it pushes into QuickBooks. Financials, job costing, and other reporting tools can be accessed much more quickly because there is much less time spent between when something happens out on the jobsite and when it is accounted for in the books.

Not only that, but if you need to prepare AIA type billings on a regular basis and they give you headaches trying to figure out what the exact percentage of completion will be for that month, then you will really fall in love with Knowify’s AIA billing capabilities. Not only does Knowify track your costs and progress on the job so that you can have a very accurate picture of percentage of job completion, it even has built in AIA style forms that most general contractors will accept. (Does your QuickBooks Desktop do that?)

Now you know – and,

The next time someone tells you to stay away from QuickBooks Online because it isn’t the right tool for the job, remind them that a drill with no bits is never the right tool forthe job either!

Playing Like One of the Big Boys Just Got Easier (3 Apps to Choose From)

Demo versions of Knowify, Contractor Tools and Bolt apps for contractors

Demo versions of Knowify, Contractor Tools and Bolt apps for contractorsAs the world moves forward with technology, a new and unique opportunity is opening up for small contracting businesses. We like to say that we at Schulte and Schulte “help small businesses ‘play like one of the big boys.’” Meaning that, utilizing the increasingly large number of options available in the technological arena, your small contracting business can operate like a large construction corporation.

You can utilize the same powerful tools and resources at a decent price. This is because, thanks to the advent of cloud technology, many tech companies are moving to the subscription based model rather than selling individual pieces of software.

The advantages for small businesses are tremendous. The old methods of software development made it much harder to scale a piece of software for various sized businesses and needs. So, many of the more powerful software choices were economically out of reach of smaller businesses.

Thankfully that is no longer the case. Additionally, the advent of smartphones and tablets is a boon for contractors who need to be able to do a significant portion of their business out in the field.

When I first began working in the construction industry some ahem-ahem many years ago, cell phones were not even prevalent. Job supervisors in the field had to carry massive paper plans with them in their work trucks, make change orders on the job site and hope that the proper person that needed to sign off on them was there. He or she then went on to write take off lists on their ever-present yellow legal pads and try to remember which jobsite that particular takeoff was for and then take photos with their film cameras to be developed at some later date.

Now, every one of those tasks has been automated and shrunk to less than an 8 ½” x 11” piece of paper. By carrying your tablet or smartphone with you onto the job you can do all of those tasks and keep every bit of them in one spot, making decisions on the jobsite much easier and leading to a significant savings in time and amazing increase in productivity – meaning you can take on more work and get it done more quickly!

Let’s take a look at three options available for contractors which can be utilized on mobile devices all of which integrate with QuickBooks Online for seamless accounting information transfer.

 

Contractor Tools

Contractor Tools is a relatively new player in the apps market, but they are growing quickly and have some really excellent features along with some limitations that are worth noting. The developers (makers of the Smart Contractor software) entered the app market with their original offering for iOS (works on iPad, iPhone and iPod) called Construction Cost Estimator. This handy tool brought the hefty Craftsman Costbooks to a portable app that could be accessed from anywhere and searched easily. It also enabled contractors to create estimates on site and get signatures on them right in the app. Building off that idea, Contractor Tools takes things a step further and includes not just the option to subscribe to the costbooks and do estimating, but also the ability to set up multiple customers and jobs for job tracking and costing, set up custom job templates to shorten the time required for putting together estimates, and even keep track of basic information on employees. It has a QuickBooks sync feature and can sync quite a bit of data with QuickBooks Online including:

  • Customer information
  • Job and job estimate information
  • Customer invoices
  • Customer payments

What we like:

  1. The easy to use, straightforward app interface
  2. The link to the Craftsman Costbooks and ability to create custom costbooks
  3. The job costing features (QuickBooks Online’s job costing features are greatly diminished, so this fills the void.)

What we’d like to see improved:

  1. Time tracking – they are developing this and we’re excited to see where they take it
  2. More operating systems supported – also in development currently with a Mac app to come out sometime this fall
  3. Improved dashboard – more job costing information would be a good start here.

What it costs:

Contractor’s Tools offers Basic, Essentials and Pro packages starting at $9.99 for one user and only one invoice per job. Other options are offered at slightly higher price points.

Where you can find out more:

Take a look at Contractor’s Tools website for more information on the app, pricing and to see some tutorials. You can also download the app and try it free for 30 days.

 

Bolt

Much like Contractor Tools, Bolt was created by contractors for contractors. Bolt is a more robust tool which includes everything from the ability to upload plan documents and draw on them in the field to scheduling, time tracking and reporting. Bolt is a web-based app that can also sync with native apps on your mobile device (for now they only have iOS, but Android and Windows apps are in development, with the Android app set to appear within a month of this writing.) So with Bolt you can create scheduling of materials and people in the office and then supervisors and field personnel can confirm that those schedules have been carried out correctly right from the jobsite. Supervisors can also look at an overall list of work orders and prioritize their day accordingly. The QuickBooks sync syncs both your items list in QuickBooks Online along with invoicing, so that everything can be invoiced in Bolt and then QuickBooks can be utilized for all of the back end reconciliations and financial reporting. Again, Bolt fills in the gap for project costing that QuickBooks Online simply cannot do.

What we like:

  1. The scheduling capabilities are fantastic – including drag and drop ease of use
  2. The ability to mark up drawings in the field is a significant benefit
  3. The fact that the main app is cloud based and accessible from any device with an internet browser.

What we’d like to see improved:

  1. While we do love that drag and drop feature, the layout can be a tad confusing. We’d like to see maybe some icons or colors to distinguish different areas of the screens
  2. The live demo is helpful, but we’d love to see a free trial download or at least demo version to click around in before buying – around here we learn best by doing
  3. More clear information up front about exactly how the app integrates with QuickBooks so that the contractor and the bookkeeper can be sure to be on the same page

What it costs:

Bolt works with clients to design a program and price that works well for them. They offer 1 month free implementation and training so that your setup is customized to your specific business and your employees are equipped to manage it from the beginning.

Where you can find out more:

Take a look at Bolt’s website for more information about Bolt, their story, and to schedule your own live demo.

 

Knowify

Knowify is another cloud-based solution. It is a very robust solution created specifically for sub-contractors and small home remodelers that offers seamless integration of all parts of the project. You can create estimates for fixed price, time and material or AIA-type commercial projects. It has some really powerful dashboard features, including a separate, easy to read dashboard for each individual job. It also has some great time tracking and dispatch management features as well as the ability to customize user privileges. Like Bolt, you can personalize the app to fit your specific business and you can use it everywhere – from the office, to the home office, to the field – everyone in the company can collaborate on the projects together in the same system. There is an Accountant’s View and also a two-way sync with QuickBooks so that the entire company can be working on the projects together, but only those with a need to know are touching the financials. One of the most impressive features of their job costing setup is the ability to not just track budgeted vs. actuals on labor and material COSTS, but to also track expected hours to be worked against actual hours worked and also budgeted materials needed for the job vs materials ordered. While traditional job costing methods can be aggravating to try and understand when overtime hours and material orders are not easily understood using only dollar figures, Knowify’s job costing can help you really see the overall picture and make up for any estimating or scheduling deficiencies in the real world. This app can not only fill in that great job costing deficiency within QuickBooks Online, but it can help you look good while doing it!

What we like:

  1. The billing features including the ability to produce AIA-type invoices with schedules of value
  2. The overall appeal of Knowify’s look and feel including the ease of navigation and simple to read dashboards
  3. The ability to receive email notifications and alerts to help you stay on top of project needs

What we’d like to see improved:

  1. With all these great features, it would be great to add a built-in CRM tool for keeping up with leads in addition to current estimates and projects.
  2. Like other cloud-based options, the information can only be accessed if you are able to be online. In a state like Arizona where contracts and/or service calls might be performed outside of mobile networking, it would be nice to have the native app available and be able to upload and sync data after returning to mobile network or wi-fi access.
  3. We’d like to see the ability to draw on plans or photos right in the app.

What it costs:

Knowify offers simple pricing based on the size of the company starting at $68 per month for 1-5 employees and include about an hour of free setup and training for one of your employees.

Where you can find out more:

Take a look at Knowify’s website for more information about the app, see a customized video demo and to start a free 14 day trial.

3 Things Contractors and Sub-Contractors Should Be Doing in Their QuickBooks Software

2016-06-27 18.27.53As a QuickBooks ProAdvisor and a bookkeeper who has worked with QuickBooks software in the construction industry for the last nearly 20 years, I am always surprised when I speak with people in the construction industry who use QuickBooks for their business, but don’t use it for job costing. Whether you subscribe to QuickBooks Online or have purchased a QuickBooks desktop version, there are many features inherent to the program that can be very useful for even the smallest of subs or handymen. Even more surprising are the larger scale contracting companies who aren’t using the robust features available to them in the QuickBooks program that they own.

Here are just three of the things that EVERY contractor who uses QuickBooks ought to be doing in their QuickBooks program:

 

  1. Estimating
    Anyone who has ever created a bid for a job knows that it can be a very intimidating process – everything from stressing over whether or not you have the right projected costs, to anticipating material delivery times, to making sure you are properly accounting for overhead can contribute to an overwhelming process. Here is where it is good to let QuickBooks ease some of the burden. Just a few things that you can do with QuickBooks to take some of the mindless work of estimating off of your plate include:

    • Create more than one estimate for a job to look at more than one possible scenario.
    • Create a copy of an old estimate to save time on a new one.
    • Memorize estimates if you frequently perform the same type of job. (Note: In QuickBooks Online transactions are called ‘recurring’ rather than memorized.)

    When creating estimates in QuickBooks, the item list is your friend. If you haven’t already done so, you should create an item list before estimating any jobs. There is more than one way (depending on your particular specialty) to set up the item list – either as a straight inventory and services based list or as a phase accounting method list where each phase of the job is assigned an item number for proper tracking. Don’t forget that you also need to make some items double-sided. Anything that you purchase from someone else (including subcontracted labor) needs to be two-sided to work within QuickBooks properly. (Another note: In QuickBooks Online the Item List is renamed the Products & Services list, but it is still the place to start.) One more thing about estimating: in both QuickBooks desktop versions and in QuickBooks Online you can customize how your forms look for ease of customer understanding – which goes a long way in determining whether or not they will eventually accept your bid.

 

  1. Using Class Accounting
    In QuickBooks Online Plus and in the desktop versions of QuickBooks you have the ability to turn on class tracking features that can make your job of understanding exactly where and how your business is making and/or losing money that much easier. For a general contractor this might come in handy keeping track of the difference between the homebuilding side of the business and the remodel side of the same company. Perhaps you want to see how well the residential part of your sub-contracting business compares to the commercial portion. Or, in a location such as the Phoenix valley, it may behoove you to sort your class tracking into geographical areas, either by city or by regions. Whatever classes will be most helpful to you and your bookkeeping professional in better understanding profit and loss is what you should use.

 

  1. Doing Proper Job Costing
    Correct and useful job costing for contractors begins with the proper item list, followed by precise entry of job estimates and appropriate class tracking setup. It is also important to note here that job costing should include direct and indirect costs as well as labor burden. Any expense your business tracks can be assigned or allocated to jobs. You can job cost in both QuickBooks desktop versions and QuickBooks Online versions, but the terminology in the programs is different. In desktop versions, you will see that you can create new Customers and new Jobs. In QuickBooks Online, you’ll be doing something very similar when you create new Customers and new Sub-Customers. A sub-customer in QuickBooks Online functions very similarly to a Job in QuickBooks desktop, but there are some differences. It is worth knowing the differences when determining which version of the software would suit best for your business. Even so, you can do job costing and even a comparison of estimates to actuals using either program.At the end of the day, job costing can make or break a business. By keeping track of which jobs made or lost money and by how much is the first step in determining strengths and weaknesses within the company and/or understanding how outside factors are affecting the bottom line. Like any other financial tracking tool, job costing reports should be used regularly to help management understand the overall health of the company. Another thing to keep in mind is that, by properly tracking job costing regularly during the course of a job, management can see if perhaps a change order is necessary to offset any cost overruns.

 

Everything comes full circle. That daunting task of estimating mentioned at the beginning of this article can actually be made simpler once a proper job costing feedback loop has been integrated into the company’s systems. Suddenly you can see in black and white how estimating errors are coming into play and correct those errors on future estimates.

Construction Progress Billings – How and Why?

G-702 AIA Official Construction Progress Billing Form
G-702 AIA Official Construction Progress Billing Form
G-702 – AIA Official Billing Form

What is Progress Billing?

A progress billing, simply defined, is work done under contract which is billed in phases. Rather than submitting one invoice, either before a project begins or upon completion of a project, the contractor will submit a number of billings to the owner of the project over the course of work as various items are completed.

 

When should a Progress Bill be submitted?

As often as agreed upon between the sub-contractor and general and/or general contractor and owner. On a typical large commercial project, the owner along with the project architect, lender and sometimes a third party inspection company will set a payment application schedule which must be strictly followed by all parties submitting invoices in order for payment to be received timely. On smaller projects the progress billing cycle should be established in the contract that you sign with your customer.

 

Start with a Schedule of Values

A good schedule of values is essential for proper progress billing. The schedule of values should be submitted as part of the original project proposal. A schedule of values is a list with the dollar amount assigned to each area of work that will be completed on the project. On large projects the scope of work is often broken out according to the Construction Specifications Institute (CSI) Divisions. Examples of those divisions are General Conditions, Sitework, Utilities, Concrete, Steel, etc. Once you have defined the areas of the scope of work, a value is assigned to each one so that a percentage complete can be established for each item as progress is made on the project. In the United States the industry standard format for progress billing according to a schedule of values is per AIA forms G702 and G703.

 

Know the Rate of Retainage

Most construction contracts will require a retainage be withheld from each application for payment. This retention is established in order to protect the owner or lender from the contractor not completing the project. Typical retainage amounts are 5% or 10%. On larger commercial projects this amount will be set by the owner or lender and can be found in their submittal requirements. For smaller projects, this amount can be decided on between the owner and contractor in the original contract. The amount will be withheld from each payment to the contractor in a reserve until the punch list is complete and the project is finalized. Each progress billing must take this retainage into account on each line item and also at the bottom line of the application.

 

How Can I Avoid My Progress Billing Submittal Being Rejected?

Progress billings can be confusing. An improper progress billing can be (and often will be) rejected by the general contractor or by the owner or lender if they cannot understand your progress billing or if they find it to be incomplete or incorrect. If not rejected, they may still be held against you. Busy general contractors or owners don’t want to do your job for you. Even if they don’t outright reject your submittal, but decide to correct it, they may hold it against you when it comes to approving bids for future jobs. Reasons that a progress billing may be rejected include incorrect completion percentages, incorrect math or late submissions. Cash is KEY! If your submittal is rejected, you may have to wait until the next billing cycle to get paid! Be sure to review all vendor invoices and percentage completions to avoid over/under billings. Also be sure to double check all your math including math completed by billing software. And, always make sure to submit your billings timely! It is a best practice to submit your progress billings early so that project management has time to review your payment request.

What About Change Orders?

Approved contract Change Orders are listed separately, either on their own Continuation Sheet or at the end of the original Schedule of Values.

Attachments

Attached are some documents for informational purposes. Sample AIA G702 and G703 forms as well as sample Arizona lien forms. For more information on progress billing contact us at 480-442-4032.

 

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