Cloud accounting in construction is worth having for one reason. It lets you see what a job is doing while the job is still running, instead of finding out eighteen months later.
Everything else about it is convenience. That bit changes decisions.
What it actually fixes
The problem with desktop software and a shoebox of receipts is not that it is old fashioned. It is that the numbers are always weeks behind, so nobody looks at them, so nothing gets acted on.
With the bank feeding in daily and receipts captured on a phone from site, the numbers are current. That is what makes job costing possible at all.
What construction needs that a standard setup does not give you
Out of the box, cloud accounting is built for a business that invoices and gets paid. Construction needs more:
- Tracking categories or projects set up per job, so labour, materials and plant land against the right one
- CIS enabled, so deductions calculate on labour and the monthly return can be filed from the software
- Reverse charge VAT rates configured properly, with the right wording on invoices
- Retention handled as a debtor rather than lost in the invoice
- Applications for payment kept separate from invoices, because they are not the same document
A setup missing those is where most of the mess we inherit comes from. The software was fine. Nobody configured it for construction.
CIS through the software
Both Xero and QuickBooks handle CIS if you turn it on and set the subcontractors up correctly.
The deduction calculates on labour with materials excluded, statements generate automatically, and the monthly return files to HMRC without rekeying. That removes the two errors we correct most often, which are the materials split and a return filed late because it was a manual job nobody wanted.
What it does not do is reconcile your CIS suffered against what HMRC actually holds. That still needs somebody to check.
Receipts from site
Materials bought on the way to a job, from a phone, allocated to that job before the van leaves the car park.
Sounds small. It is the difference between job costs that are right and job costs that are missing every trade counter purchase anyone made in cash.
What it will not do on its own
Worth being straight about, because software gets sold as though it thinks for you.
It will not tell you a job is going to lose money. It will not chase your retentions. It will not decide whether a customer is an end user for the reverse charge. It will not notice that your cost to complete is optimistic.
All of those need somebody looking at the output. The software makes the looking possible and quick. It does not replace it.
Making the switch
The best time is your year end, because you start clean rather than migrating half a year of transactions.
Budget a week of overlap, get the job structure decided before you start rather than after, and make sure CIS and the reverse charge rates are configured on day one. Retrofitting those later means recoding months of transactions.
If yours is set up generically
Most of what we do in the first month with a new client is reconfiguring cloud accounting that was set up for a business in general, not a construction business in particular.
Have a look at how we set it up or book a call.