Bookkeeping Software for Contractors
It’s the time of year when QuickBooks Desktop clients need to upgrade their license to the newest version. Some of my clients begin thinking about moving to one of the online accounting services, so I get a lot of questions on QuickBooks Desktop vs. QuickBooks Online, Xero and others. In the last couple years the online bookkeeping solutions have really closed the gap on the offline versions, but there are a few areas where the desktop version still has its advantages. This is particularly true for industries that use progressive billing with estimates and job costing.
I happen to work with a number of contractors so I wanted to give some specific advice on what contractors should look for when choosing their bookkeeping software. Contractors spend a lot of time creating estimates and invoices for current or prospective clients. Whatever can make this process easiest can be a big time saver. Quickbooks Desktop and Quickbooks Online both allow you to create estimates which can later be converted into invoices for you client. Xero also includes this feature, but there they are called “Quotes” rather than estimates.
Another feature that I see contracting clients overlook is transaction classes. This little feature allows you to categorize expenses from various vendors under a single job. Quickbooks Desktop and QBO allow you to set classes for income and expenses. Once again, Xero has a very similar feature under a different name, in their service it is called “Tracking.”
So, once you’ve given the client an estimate and completed the work it’s time to bill the total right? Well not so fast! As anyone working on a longer projects knows, you need to maintain cash flow. That means progressive billing, also known as progressive invoicing. As you hit milestones in the project you need to bill you clients for that portion of the work. Just because it’s a multi-month project doesn’t mean you don’t have bills to pay!
QBO and Xero both make it incredibly easy to turn an estimate or quote into an invoice and send that off to the client. The problem is that they only let you turn the entire estimate into an invoice. This is where classic Quickbooks Desktop still shines. When working in the desktop version you can bill a set amount or percentage of the total estimate you created at the beginning of the job. This allows you to conveniently draw down from the total until the job is complete.
So, when contractors ask what software they should use the answer is…it depends!
If your jobs are single-stage projects or you don’t work from estimates, then it doesn’t matter all that much. But if you need to bill regularly for longer jobs, Quickbooks Desktop is still the way to go. The developers behind QBO and Xero have both acknowledged that progressive invoicing is somewhere on their list of features to add, but they’ve been saying that for years. Personally, I’m not expecting big changes anytime soon.
Please let me know if you have questions about progressive billing or anything else I mentioned in the post. If you’re tired of handling the bookkeeping yourself, contact us to schedule a free consultation!