Construction accounting software makes it easier to keep track of direct material purchases.  Direct materials consist of basic building supplies like drywall, wire, pipes, and wood.  Essentially, direct materials are everything purchased for a project.  Sometimes these materials are purchased tax-free or with a builder’s discount.  These items are generally recorded separate of labor costs to ensure accurate profit and loss statements.

Direct labor is another variable that must be kept track of separately.  Labor comes in different forms, each requiring special treatment with regard to taxes.  Some employees are on the payroll while others may be hired on a contractual basis.  Other work might be performed by subcontractors.  Construction software really comes in handy when keeping track of direct labor spending.  Often this software integrates with payroll software to streamline wage calculation and tax withholding.

Although it isn’t necessary to keep track of withholding for contract work, it is still good to generate 1099 forms.  Construction software makes this a simple process, allowing generation 1099 and W2 forms at the end of each year.  In the case of an audit, this software is a time-saver.  It keeps track of your tax information year after year.

Construction businesses must keep track of services in a separate category.  This need is reflected in most construction software.  Services differ from direct labor because workers performing the work are actually in the employ of another business.  For example, workers sent to repair rented equipment or refuel equipment might fall under service expenses.  These expenses are tracked separately and considered a direct expense.

Today it is becoming much more common to subcontract or sublet portions of a construction project.  Some construction business models rely heavily on contracted work and have very few payroll employees.  Some of this sublet work consists of both labor and supplies, while other work consists solely of labor.  Common sublet work consists of foundation work, grading, cabinetry, and even framing.  Construction management accounting software makes it possible to keep track of these expenditures.  The ability to review sublet work allows the construction company to keep tabs on sublet spending.

Some construction companies keep track of expenses in traditional accounting software.  However, this software doesn’t meet the needs of most builders.  Construction accounting software was designed with builders specifically in mind, and it allows them to keep accurate records of costs without devoting excess time to it.