The right accounting software can save you time and money, support your business’s growth, and help you qualify for bonds. Is QuickBooks up to the job? If so, which version should you use: QuickBooks Online or Desktop? Wade shares the questions you need to answer to find out which software is right for you, as well as his thoughts on the limitations of QuickBooks you might run into as a contractor.
Topics we cover on this episode include:
- Can QuickBooks work for contractors, and how does it affect bonds?
- The limitations of QuickBooks for contractors
- How to decide which accounting software is right for you: real-time accounting vs after the fact accounting
- QuickBooks and job costing
- Summary job costing vs detailed job costing
- Labor and payroll in QuickBooks
- Quickbooks versions and remote access
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Rob Williams, Profit Strategist | IronGateESS.com
Wade Carpenter, CPA, CGMA | CarpenterCPAs.com
Stephen Brown, Bonding Expert | McWins.com
[00:00:00] Rob Williams: Welcome to the Contractor Success Forum. Today, we are talking about QuickBooks for contractors, Desktop versus Online. And we have with us, our wonderful CPA, Wade Carpenter, Carpenter and Company, CPAs. And we have Stephen Brown with McDaniel-Whitley bonding and insurance company. And I am Rob Williams and I am a little bit off today because I am at the World of Asphalt here in Nashville. Broadcasting live on a recorded show here for you guys today.
[00:00:43] Talking about, again, QuickBooks, Desktop versus Online. There’s so many rumors about this, which one’s better, which one’s not, and we have Wade to give us the scoop here today. Wade, what’s happening with that?
Can QuickBooks work for contractors, and how does it affect bonds?
[00:00:58] Wade Carpenter: Well, there’s a lot to talk about there. Just wanted to say, first of all, obviously QuickBooks, either version is not the end all be all for contractors. There are other software providers that provide accounting software that will do a lot more contractor-specific things, job cost specific things that you won’t find in QuickBooks, either version.
[00:01:20] But with that said, QuickBooks definitely fills a spot in the contractor market for a lot of smaller contractors. I’m not going to try to drop names or, you know, some of these bigger ones, but a friend of mine that does accounting software implementation on these higher end systems, her rule of thumb is you may spend several thousand dollars on the software, but you need to plan on spending at least three times as much on the implementation to get it working right. So, my main goal right now is to dispel some myths and give some personal opinions that may get me some hate mail out of this.
[00:01:58] Rob Williams: Yeah. I tell you, you say three times with the mass program like QuickBooks, I’d say I spend 10 times more because QuickBooks is one of the less expensive softwares out there. So yeah, I’d say it’s multiple times over. What you do to get the thing running, rather than just paying for it. Where some of these other ones I’ve had in the past were tens of thousands of dollars–
[00:02:23] Wade Carpenter: Yeah.
[00:02:23] Rob Williams: –that I use for some of my companies. And the three times rule probably applied there, but.
[00:02:29] Wade Carpenter: Well, I guess I may want to defer to Stephen here, but believe it or not, I have $150 million general contractor running on QuickBooks Desktop that I’ve worked with for 15 years. They do a wonderful job. They have great job cost records. The bonding company loves them. The bank loves them.
[00:02:49] But then again, there are a lot of people that don’t run it properly. And I should also say if you’re doing 150 million, depending on the type of construction, the number of jobs, it may not be right for you to be doing it at the $150 million level. But you know, there is probably some time that maybe you need to consider changing. So I just want to talk about–
[00:03:14] Stephen Brown: Please do. You know, the accounting system software, it’s an ongoing topic that we talk about in the bonding business all the time. That’s one of the first questions. What software program do you use? What do you like about it? What you don’t like about it? Because we’re not accountants, but we’re forced into it all the time, because if you can’t produce good reports for us, we can’t get you bonds.
[00:03:37] Wade Carpenter: Right. Generally speaking, do you trust, you know, a QuickBooks in-house statement?
[00:03:43] Stephen Brown: As long as everything reconciles. The balance sheet and income statement and work in progress report, they all need to make sense. They all need to to go together. So that’s one. And then at a bare minimum, we have to have a CPA-prepared review caliber year-end. And if your accountant has hard time doing that because your accounting system is not providing them the information they need to put that report together, then you’re really in trouble. Because at that point, in my opinion, you’re not managing your company. So this is everything.
[00:04:19] Wade Carpenter: Yeah. Right.
[00:04:20] Rob Williams: I’m still amazed that, 25 years ago, I remember being upset that all of our systems and our accounting were not integrated. Now it’s 2022 and we’re still not integrated, on a lot of these things with software. It’s just amazing to me how that stayed separate.
Limitations of QuickBooks for contractors
[00:04:41] Wade Carpenter: That’s another part I want to bring up today. Because there’s a lot of things and obviously I can’t give all my opinion in 20 or 30 minutes on this subject, because typically when I’m working with a contractor, I’ll spend a couple of hours designing a system. But just to briefly state again, the powers that be at Intuit may come smite me later, but QuickBooks Online is still very limited when it comes to job costing and things like that. I’ll say basically that, if you need a job costed statement for bonding, a true one, QuickBooks Online may not be the right fit for you.
[00:05:20] I just was going back and forth with some firm that supposedly was a contractor-specific CPA firm. Well, they tried to do several industries, but they were pushing people on QuickBooks Online. I actually had one come back to me like six or seven months later and said, “that was the worst decision I ever made because I can’t get the job records I need.”
[00:05:44] Stephen Brown: Well, that’s gotta be frustrating. I have so many customers spend a fortune on their accounting system and they’re sold somewhere on the accounting system. And my advice is involve your CPA, if you have a good construction-oriented CPA that is there to guide you through this. I don’t care if you’re on a team, you can’t expect your CPA to not be on board with whatever software program you decide to use. I’ve spoken my piece, Wade.
[00:06:13] Wade Carpenter: Well, Intuit has done a wonderful job of trying to force everybody onto their online product. They make more money that way, the subscription model where they’re making continuous monthly revenue, whereas they weren’t making as much with the desktop product. And they actually have changed that in 2022 here. They’ve actually now brought the QuickBooks Desktop product into a annual subscription model where you have to pay every year or you don’t get to keep using it. And I think they finally realized that for a certain segment of the market, it’s not going away.
[00:06:51] You mentioned some of these third-party apps. A lot of times people will choose their accounting software based on– and again, I’m trying not to throw out vendor names and things like that, because a lot of them will do what they need them to do, or at least on the surface. But there are some things that, they say they will sync with QuickBooks. It may sync with QuickBooks Online, but not Desktop, and sometimes vice versa. But the idea is let’s not key it twice. Half the time it never gets set up properly. Somebody has to key it somewhere. And when you’re doing job costing, it takes some effort beyond just pulling information in.
[00:07:31] Rob Williams: I’ll definitely say as a contractor, we were much more biased to having the job costing work than we were the accounting. It’s like, okay, well the accountants are just going to figure all that out. Now, in the home building industry, you know, that’s a lot more job cost specific, so it probably is than the commercial because you’re counting every board and stick and nail and everything that you have, and POs, and everything. So that was our whole world. And we just had to make the accounting work. We weren’t as worried about the bonding and stuff, in our positions, as the commercial contracting world.
How to decide which accounting software is right for you: real-time accounting vs after the fact accounting
[00:08:08] Wade Carpenter: Well, if you’re a home builder and building spec homes and you’ve got to report to the bank, you have to turn in things. So that kind of gets into the few questions I ask to say, which one is right for you? And the first question I ask when I’m talking to a contractor is do you need realtime books, or do you need after the fact accounting? And I probably need to explain that a little bit, but you know, after the fact accounting, QuickBooks Online touted the fact that, we’ve got these bank feeds for credit cards and banks. We’ll pull all this stuff in and get it all done for you and you don’t have to do anything.
[00:08:43] If all you are really concerned about is whether you can get your books to your CPA for taxes, well, maybe that’s just fine. But if you’re concerned about job costing, that’s a different animal. So, if you’re looking for more real time stuff, don’t get me wrong because QuickBooks Online definitely can do real-time accounting, and there are some great third-party apps that will bring in payables and things like that. But by and large, it was built to be more of an after the fact type accounting. And it puts a certain mindset in any business owners that, it’s going to do it for me. And sometimes it can create a bigger mess than you realize, just because you’re relying on the things to automatically do it for you.
QuickBooks and Job Costing
[00:09:29] Wade Carpenter: And then the second question, I guess, then I’m, there’s going to be a couple of sub questions, but do you need job costing, number one? I think I already said it, but if you need job costing for Stephen, I think the question is hands down, you absolutely need to be using desktop version because the limitations I’m going to talk about in just a minute, are, you know, without using these third-party apps– and again, too often, I see they don’t work. But you know, if you need real job costing, whether you’re looking to do it in-house or for a bonding company or you really want to know how you’re doing on a job, and I would argue the fact that any contractor that really wants to do better really needs to do job costed books because they don’t know how they’re really coming out on the job.
[00:10:18] Rob Williams: So you’re doing the job costing in there as opposed to, I don’t know what your opinion, you’ve mentioned the third party apps, but it seemed like I talked to a lot of people that are saying, it’s not going to work either way. Well, they may not have tried the desktop, but they’re convinced that they’ve got to do the third party apps and then I’m not exactly sure how they’re getting it and coordinating it with, say, their QuickBooks Online or whatever else they’re using. So that’s always very difficult for me to understand because the more years I go not being a contractor, the further I get away from it.
[00:10:53] Wade Carpenter: Right. Well, again, the third-party apps, they’ve got great intentions, and they would work if number one, they set up properly. But number two, you’ve got to realize that somebody’s got to physically do these, go and allocate the job costs and stuff like that. And if you’re not willing to do it, you’re not going to get there, no matter what system you get.
Summary job costing vs. detailed job costing
[00:11:14] Wade Carpenter: The next sub question I would ask you, you know, if you need job costing, do you need summary job costing versus a detailed job costing? And when I explain that, let’s just start with summary. If you need just the chart of accounts level, like labor, materials, subcontract, equipment, other, and just rolling it up into those big categories, and for a lot of contractors, that’s a big step forward. QuickBooks Online will do that with some limitations, and obviously desktop will also do that.
[00:11:44] If you need a detailed job costing structure, like a phase code cost code type thing, or like Rob, you mentioned home building, a lot of banks break it down in the 10 categories and all that stuff. If you need to put it in those, you know, say you’re a GC and you have electrical, plumbing, concrete, demo, whatever. If you need to break it down, even into those sub levels, then that’s more of the detail phase code cost code. And yes, in QuickBooks Online, you can have those items, but the job costing reports are horrible and they will not give you that detail. And again, I know this is just my experience with 30 years of working with these people. I’m actually a very tech savvy CPA, and I usually would tout all these things that are online. But there are certain things that, you know, it was written a certain way. And QuickBooks Online was made to run in the cloud and it’s not necessarily conducive to construction.
How much do you self-perform on your own labor?
[00:12:42] Wade Carpenter: The next sub-question on the job costing, how much do you self perform on your own labor and putting it into on a job? QuickBooks Online, even with their online integrated payroll, will not do job costing period on the labor. You can do it if you go back and manually do journal entries and break it down, but it’s a very manual process. If you want to do integrated payroll that will actually do the job costing as you go, as well as allocating payroll taxes, allocating workers’ comp, general liability, some of these other things like overhead that it was tied to payroll per diem, stuff like that, QuickBooks Desktop will do that with their integrated payroll system.
[00:13:33] And while I’m on that point, I guess I would also say if you’re doing certified payroll, you cannot do that with QuickBooks Online payroll system. QuickBooks Desktop payroll, I was pleasantly surprised a few years ago. They brought that to the point where I can actually spit out a certified payroll report directly from QuickBooks that I can turn in and the contractors will accept. That can be huge. And it’s very time consuming process if you’re using ADP or Paychex and have to do those manually, or even QuickBooks Online.
[00:14:10] So, let me take a breath and see if you guys I have any questions. I feel like I’m kind of running on and on.
[00:14:15] Rob Williams: It sounds like we still have the same issues that we had back 15 years ago. Like I said in the beginning, I’m just so surprised because like you mentioned, we went through the Paychex and the ADP and all these different services that were going to help solve all these problems and they cause some massive problems with that. I don’t think on our residential jobs, we didn’t even try to allocate the workers comp, those kinds of things to the job. We had percentages that we would just put in, but we didn’t try to do that by the hour and burden that. But that’s just, it’s unbelievable the complexity that we’re still trying to fight these battles that are not solved yet.
[00:14:58] Wade Carpenter: And some of them are constant battles and there’s no real way to do it. But you know, what you mentioned doing these with journal entries and percentages and all that stuff, that is still a way we have to do with several people.
Do you need remote access?
[00:15:11] Wade Carpenter: The final question I’m gonna throw out here today, do you need remote access? QuickBooks Online obviously was built where you can get to it anytime, anywhere. And that’s one of the huge selling points, they say. But you know, there are also some benefits in the fact that these third party apps will talk to it without having to go through a server, things like that.
[00:15:32] But with that said, QuickBooks Desktop also can be remote hosted, and there are third-party commercial hosts. And again, I’m not trying to throw out recommendations, but you know, Right Networks is probably the best known in the game, but there are plenty of them out there that will host it and you can get the same level of access. Getting to your data anytime you want, as long as you’ve got an internet connection. We’ve realized that we’ve gone through several iterations of this, of logging into people’s server and stuff like that. But the remote hosted desktop works really well where a contractor can get it and then we can get to it and help them build their books, or sometimes we’re doing the full back office where we’re doing that and the contractor can see any reports he needs to.
[00:16:20] Stephen Brown: The main thing I hear about is the project managers inputting their project data so you can stay up to date on your job costs and your billings. Your remote guys that are working at the job site that are dealing with the day to day transactions of that particular job.
[00:16:38] Rob Williams: You were just mentioning like the 10 codes, that’s sort of the commercial, because I still see residential versus the commercial is just two whole separate universes. The cost coding gives it not, we didn’t have 10 things, we had the home builder’s chart of accounts that were 20 codes, and then in our framing company, it’s the commercial side over here, we had the, what I would now kind of consider the standard way of doing things. But the residential world still didn’t know that in all the software, it’s just a totally different names of softwares and solutions and everything were just a different animal than the commercial side. So, I think it’s still that way from, I was with a builder last night and just hearing the names of them, it’s not the same names as the software. It’s totally different solutions.
[00:17:26] Wade Carpenter: Yeah, the names have changed and some of them have been bought out by others, but the game is still, you know, it does depend. For some contractors, if you can just get the level of labor materials, equipment, other, and that works for you, that’s great. There’s a minimum, and then there’s also the extreme one, trying to get thousands of job codes. At some point it becomes ridiculous and more work, but you know, what I hope is the contractor gets the information they need to run a better job and make more money at it. So that’s where I’m going.
[00:17:59] Stephen Brown: To me, it’s also about the ease of use because I’ve seen so many clients spend a fortune on an accounting software program that had all the bells and whistles and they were like, great. I can grow with this system. And then there was literally no support. Huge fees for this support that they paid that were non-existent.
[00:18:26] And again, you’re dealing with, let me be a contractor. I don’t want to be an accountant. I’m a bond guy. I don’t want to be an accountant. I think that’s one of the keys to my success is not being an accountant or pretending to be an accountant or lawyer or anything else. But the reports that we need have to be timely and we have to have them. And we’ve got to get toward that point. And if we’re getting the reports we need, always your construction-oriented CPA, Wade, can show you, this is the best way to do business. They don’t compete with each other. But I really do appreciate you breaking out those differences, because we all have clients that are using QuickBooks and they don’t know what to sign up for.
[00:19:14] And again, Wade, I don’t know what you do when a client or potential client comes to you for your recommendations. I know you have to ask a lot of questions, but I would think you’d have to be an expert on all the software programs.
[00:19:29] Wade Carpenter: Well, you don’t have to be an expert on all of them, but if you understand the construction accounting, you understand what they do and, getting them to do what they need to do, sometimes it does take the specialist.
[00:19:40] But just going back to what you said about what they spend on software support. What I said at the beginning, my friend that said, you need to budget three times the cost of the software in implementation. I don’t know how accurate that is, but I’ve seen some of the bills.
[00:19:55] Rob Williams: Yeah. Yeah. I’d say three times was low from my experience. But one of the other things Stephen just said was about, I was guilty of saying, I’m going to grow into this software and buying the bigger ones. Bigger companies is not better, I mean, right? Size that for you. We kept saying, oh, well, gosh, this huge company, they’re using this. So we want ours to be really good. So we’re going to use that too.
[00:20:20] Stephen Brown: Yeah, but I don’t want to outgrow my system and have to go through this again.
[00:20:24] Rob Williams: Yeah, but we were so far from outgrowing that. Getting the right size system is a huge, important thing. I hired a guy for two years, worked on a system. I still feel guilty about that guy in the nineties. I probably need to call him and apologize. Two years he worked on that, we never got a job out. Two years. Poor guy, that had to be the most frustrating job in the world. We had bought this huge system and we were going to change the world with it.
[00:20:53] Wade Carpenter: Unfortunately I see that all the time too, and I’m not trying to knock QuickBooks Online, but you know, it does not do everything that they lead you to believe it does. That’s my opinion. But then again if you really don’t care about job costing, what Rob said, there are a lot of people on the residential side that really don’t care. It’s like, as long as I got money in the bank account, they don’t care what the job cost really is. If all you’re trying to do is get after the fact accounting to get your taxes done, it’ll work.
[00:21:22] Rob Williams: –actually saying the opposite. In the residential, we were more concerned about the job costing. We weren’t concerned about the other side. We were so gung-ho on our purchase orders and everything matching.
[00:21:34] Stephen Brown: Well, everything that we talk about on Contractor Success Forum is cash flow and job costing. So, read between the lines of what Wade’s saying.
[00:21:44] Rob Williams: Yeah.
[00:21:45] Wade Carpenter: I mean, I guess all I’m going to say is I can build a working system out of the box with QuickBooks Desktop that can do a lot of these things that these third party apps have to do to supplement QuickBooks Online. And then again, they still don’t necessarily work. And anytime you’re working integrations, I guess sounds like Rob’s experience. It doesn’t always work.
[00:22:09] Rob Williams: Yeah, but getting the people to do it, and that was part of it. We didn’t hire the guys. We hired a lesser expensive guy to do it rather than hiring the guy to come set it up for us. That was a big mistake. Getting the right people that know how to do it is important.
[00:22:29] Wade Carpenter: That sounds like the same story I told about the guy with the squeaky floorboards , knowing where to nail.
[00:22:35] Rob Williams: Yeah, exactly. Exactly. Well, this is very helpful.
[00:22:40] Wade Carpenter: Well, I couldn’t hit everything in 30 minutes, but I hope I gave some people things to think about. I hope Intuit doesn’t show up at my door and have my head on a platter. Hope I don’t get hate mail from this. But quite frankly, the things that they say it does, it does not necessarily do very well for QuickBooks Online.
[00:22:59] And I think they finally realized in 2022 when they changed this desktop model, that there are a lot of people that believe that, well, number one, they should have probably taken the desktop and put it in the cloud. If they had done that to begin with, it would have been a lot better working. anyway.
[00:23:17] Rob Williams: All right. Well, hopefully they’ll listen and they’ll keep integrating these things. And one day we’ll have one QuickBooks.
[00:23:25] Wade Carpenter: Well, I don’t know about that, but like I said, some day, somebody is going to replace them or something, but you know, if anybody is listening to this and they have questions about it, I’m glad to take calls and discuss your own personal situation. One size doesn’t fit all, I guess I would say.
[00:23:42] Rob Williams: All right. Well, I really appreciate that information and knowledge on this, because it’s a very common thing. Are young QuickBooks Online? Some people they say, they’re not going to take a client that’s not QuickBooks Online as a business.
[00:23:58] Wade Carpenter: There are accounting firms that do that. But they don’t do necessarily construction.
[00:24:02] Rob Williams: Exactly. Exactly.
[00:24:03] Wade Carpenter: And they have an after the fact model type thing. And all they’re trying to do is get tax information.
[00:24:09] Rob Williams: Right, right, right. And like you said, the third party apps, some of these guys were just gung-ho on their separate job costing software and then they just, like I mentioned earlier, they just let somebody else figure out all the accounting and how they have to tie it together. I’m sure you’re not looking forward to seeing those guys come through the door though, Wade. so
[00:24:29] Wade Carpenter: We don’t mind tying things together if they work, it’s just relying on some of these third party things to run your business is where they mistake.
[00:24:37] Stephen Brown: Again, construction accounting is an art form. It’s something that comes from years and years of practice. And I’m sure one-on-one, if you’re a client of Wade’s, and you ask him this question: Wade, in a dream world, what software program would I operate that you could help me with, and that also you enjoy using? You definitely have an opinion. So I’ll just say it. Guys, your CPAs are some of your best sources. And make sure that you get the best construction-oriented accountant you can find. It’s worth their weight in gold. There. I said I spoke my piece earlier. I guess I’ve done it twice now.
[00:25:23] Rob Williams: Yeah.
[00:25:23] Stephen Brown: But thank you, Wade.
[00:25:25] Wade Carpenter: Thank you for saying that.
[00:25:28] Rob Williams: All right. Well, thanks a lot again, Wade. This has been another great episode of the Contractor Success Forum today, broadcasting from the World of Asphalt. I appreciate everybody listening. Follow us on ContractorSuccessForum.Com. Start some discussions, ask us some questions. Right now we have a LinkedIn page. You can ask us questions online there. This is probably a really good topic. Somebody should be asking us questions on this, and discussions online. So don’t be afraid to get those answers on the Contractor Success Form links that we have.
[00:26:09] Thanks everybody. Have a great day and come back and see us.
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