Introduction
Construction companies run differently than businesses in other industries, particularly when it comes to finance and operations. Each project runs like a small business with its own profit and loss statement, budget, risk of running over, and consequences if problems aren’t detected in time. A connected technology stack provides the visibility your sales, operations, finance, and executive teams need to understand the health of the business and make data-backed decisions with confidence. This is why your tech stack, the collection of software that supports visibility and business operations, needs to be able to provide full insight into each one of those individual jobs.
Growing construction companies eventually reach a point where they consider upgrading their software. Before evaluating a new platform, however, it’s crucial to both define the output you need from your system and determine whether the platforms you have in place have the capability to do so. Understanding a list of core functions that you need to successfully run your construction business is a great place to start.
Address the Problem Before the Platform
The construction technology landscape offers software solutions for nearly every aspect of a contractor’s business, from project management and field operations to accounting, payroll, and HR. Some platforms provide an all-in-one solution, while others allow companies to select best-of-breed applications and connect them through integrations.
There is no one-size-fits-all solution. The right technology strategy starts with understanding your business needs as they relate to company size, processes, growth plans, reporting requirements, and operational complexity. Begin by documenting current-state pain points across operations, accounting, project management, and the field. Identify where work is being duplicated, information is delayed, reporting is limited, or manual effort is creating risk. From there, define future-state requirements based on business objectives, such as supporting growth, improving visibility, increasing efficiency, or enhancing decision-making. This exercise helps distinguish problems that require new technology from those that can be addressed with the systems you already have.
We’ve worked with companies that were told they needed to abandon their accounting platform once they reached a certain size when, in reality, the existing system could have supported them longer with the right approach. The key question is whether your software can meet your needs when properly configured, supported by effective processes, and fully utilized by your team.
At a minimum, every construction company needs to be able to see profitability by job. If your overall numbers look fine, but you can’t tell which projects are profitable or losing money, there’s a visibility gap worth addressing.
Know What Your Stack Needs to Cover
Regardless of what software you use, your tech stack should handle three core functions:
Project management
Project management should track contract values and budgets along with your commitments to vendors and subcontractors through purchase orders. It should allow you to see whether spending is on track and account for change orders on both the revenue and cost side. Your project management platform should also enforce strict data entry, meaning if a field isn’t filled out or contains incorrect data, the entry can’t go through. The system may accomplish this via data validation of entries or picklists to eliminate the ability to provide incorrect data. Having this control in place prevents “garbage in, garbage out” with data entry that can undermine job costing.
Nice-to-have functions within this category that elevate user ease include photo documentation for works-in-progress, the ability to maintain project plans and timeframes, a CRM function for tracking client conversations, real-time budget alerts, and controls that require approval before a team member can exceed the budget.
Common systems for construction: Procore; BuildOps
Payroll
The most significant payroll non-negotiable is that it needs to connect to job numbers so that labor is tracked by project. If your payroll system can’t tell you how much a specific employee cost on an individual job, you won’t be able to accurately predict profitability. This requires an integrated timekeeping system that captures validated project numbers, whether that lives in your PM software and pushes to payroll, or is handled directly in the payroll platform. Either approach works as long as time is allocated to a job and feeds into other systems.
Your payroll system should also integrate directly with your accounting system. Many construction companies still use manual processes (such as pulling payroll data out, adjusting it, and re-entering it into the system) that are both inefficient and prone to error.
Nice-to-haves include geofencing, which prevents employees from clocking in unless they’re on site, and support for certified or union payroll if that applies to your work.
Common systems for construction: ADP; Miter; BBSI, or payroll processed through your accounting system
Accounting
Your accounting system needs to handle core functions like paying bills, invoicing clients, cash and credit management, and critically for construction, work-in-progress (WIP) reporting. WIP compares project progress with costs incurred and helps identify jobs where spending is outpacing actual completion. For example, a system can calculate that a project is 50% complete based on the budget spent, but the operations team might know that the job is actually only 25% complete, pointing to overrunning costs. Ideally, WIP processes should give operations a method to contribute to estimated completion per job and provide accounting a record of their changes and audit trail.
Beyond WIP, your accounting system should handle job costing, purchasing, budget versus actual reporting at the project level, and variance analysis. It should also allow you to track transactions across relevant dimensions, such as jobs, vendors, customers, contracts, cost codes, and cost types, to support meaningful analysis.
Nice-to-haves include AIA billing, cash flow forecasting, customizable reports, and multi-entity consolidation when applicable.
Common systems for accounting/ERP functions: Intuit Enterprise Suite; Sage Intacct; Sage 300; Foundation; NetSuite; Accumatica; Deltek
Choose Between All-In-One vs. Connected Systems
Once you know the core functions that your system should provide, the next step is to determine which technology structure makes the most sense for the business.
An all-in-one ERP covers project management, payroll, and accounting within the same system. The primary draw is simplicity, but with a trade-off of flexibility. If the payroll or reporting functionality within your ERP falls short, you’re stuck with it until you can upgrade systems. Additionally, many all-in-one platforms may not provide the full accounting functionality that you need. Before committing to an all-in-one system, involve your accounting team (or a third-party consultant) to evaluate day-to-day usability and confirm that the system can provide the reporting and KPIs your business relies on, such as job profitability, WIP, cash flow, labor productivity, or AR aging.
The alternative is selecting separate tools for project management, payroll, and/or accounting, then connecting them through application programming interfaces (APIs) so that data can flow between systems automatically. This gives you more control over each function and ability to tailor platforms to your needs, but multiple systems can increase complexity and cost while presenting the risk of data reconciliation issues.
The right approach depends on your business size, priorities, and the balance you want between convenience and control. The solution can change over time as well; many companies start with an all-in-one system, then shift to a modular system as their reporting needs become more complex.
Whichever approach you choose, it’s crucial to avoid adding unnecessary systems. We’ve seen companies end up with multiple systems all needing to talk to each other, and when one malfunctions, it negatively impacts all other systems as well.
Know When to Bring in Support
Before investing in new software, ask yourself, “Is my current system missing this capability, or does it exist and my team hasn’t been trained to use it?” The two problems have different solutions (and one is significantly less costly to fix than the other).
A third party can help answer that question objectively and, if a new system is the right choice, support the implementation. Software implementations are costly and labor-intensive, and an experienced partner can help evaluate options and guide your team through the transition. We worked with an $80 million concrete construction company that had outgrown its system and was struggling with delayed reporting and limited visibility into cash flow. Our team led a migration from Microsoft Dynamics GP to Sage Intacct and was able to bring the books current, redesign financial reporting, implement purchasing controls, improve cash flow management, and train a new controller to oversee new processes. Adding support helped the accounting and operations teams maintain stability while adapting to the new system.
Ultimately, the best tech stack is the one that gives you visibility into each of your jobs so you can make informed decisions. Having an efficient process and timely data should be major factors when working through your tech stack decisions. The more clearly you understand your business and the functions that your tech stack should provide, the better those decisions will be.
About the author: Christi Cereghino is a Regional Partner at NOW CFO who specializes in working with construction companies. She has hands-on experience across multiple construction technology implementations, spanning companies from $10 million to $500 million in revenue. Through that experience, she has seen many iterations of construction technology stacks and brings valuable insights into each of her client’s individual needs.
