There's an ongoing conversation on the JLC Online Forums that many of you can probably relate to -- a contractor in Virginia, having relied on Microsoft Excel for estimates and QuickBooks for accounting, thinks his company may need a construction accounting software tool of some kind. Though the conversation tends to center on a single product, it also provides some insight into the basic functionality that contractors need (and want).

Of utmost importance, not surprisingly, is payroll -- that is, employees and their withholdings, timesheets, wages, benefits, taxes and so on. Another key is the ability to track committed costs; some accounting software will only costs that have been entered as bills, which makes it difficult for you to see how much a job in progress is costing you. A third important point is integration with other software that you use. You don't have to complete your estimates in one application and then retype or copy and paste that data into your construction accounting software.

There are, though, some things the software cannot do for you. As forum veteran contributor Allan Edwards put it:

It is imperative that contractors understand balance sheets and income statements and how they interact with each other, the concept of when revenue is recognized, where draws/advances go on the balance sheet, the concept of WIP and where it is on the balance sheet, and what happens when you close a job (Cost of Sales and Sales Revenue) and how these dollars move from the Balance Sheet (WIP-Liability) to the Income Statement and back to the Balance Sheet as Earnings.

It is also important to get your books in order before you start to move data from your old accounting software application to your new one. After all, if you feel that your current system is disorganized, the last thing you want to do is carry that disorganization over to your new system.