Register now for Pantheon 2024!
Thorough accounting, including tracking job costs vs. actuals and sending accurate, timely invoices, determines a construction company’s success. With the unpredictable nature of the industry, relying on manual processes and spreadsheets leaves too much room for error.
In their presentation for Pantheon 2023—ServiceTitan’s annual conference for the trades—ServiceTitan Instructional Designer Inessa Simonyan and ServiceTitan Senior Training Specialist Stephanie Mednikov share three of the unique accounting challenges that construction businesses face and how ServiceTitan helps solve them.
“We're going to define how ServiceTitan enhances financial visibility for project tracking expenses,” Mednikov says. “We're going to recall how ServiceTitan consolidates financial information into one place, and we're going to identify how ServiceTitan enhances flexibility for billing practices as well.”
Below, delve into the unique accounting challenges faced by construction businesses, and discover the best practices for everything from budgeting to project costing to developing accurate and efficient financial management.
The lack of visibility and accuracy can lead to major issues with financial management, budgeting, and decision-making. We always want to know where we stand, so we are not left guessing on our project.”
Challenge 1: Lack of Financial Visibility and Project Expenses Tracking
A common challenge for construction companies is a lack of financial visibility for the tracking of project expenses.
“The lack of visibility and accuracy can lead to major issues with financial management, budgeting, and decision-making,” Mednikov says. “We always want to know where we stand, so we are not left guessing on our project.”
ServiceTitan enhances financial visibility with its budgets vs. actuals report.
“We've got that handy table in our project that is available with project tracking, and it'll show you the values for your project up to date, and you can use the table to manage it in real time, so it's constantly updating as the project is in progress,” Mednikov says.
You can drill down further into the table based on the labels from the original estimate. Labels can be assigned to job types, invoices, estimates, estimate items, invoice items, services, materials, purchase orders, and more.
“Your labels make your tables,” Mednikov adds.
When you click into a label from your budget vs. actuals report, it reveals the labels nested under it. For example, apprentice labor may be nested under labor. Each number is also a clickable field.
“You can click into a budget number and see exactly where that number was populated from, whether it came from the original estimate or a change order,” Mednikov says. “And then the same goes for your actuals. If you click into the number beneath the actuals column, it'll show you if that actual came from an invoice, a bill, or timesheet labor.”
Labels can be applied to pricebook items, job types, and technicians. To save time, set default labels. Defaults available in the pricebook include materials, equipment, services, and labor. These labels will appear automatically on estimates and invoices, and can be overridden if needed.
You can also apply default labels to job types.
“If you create estimates for the different phases of your project, and each of those phases is going to be assigned to a job, and maybe the rough-in job has 10 appointments on it, that job type can be pre-labeled,” Mednikov says. “And what's pretty cool about doing it that way for your job types is that that label will apply to all paid timesheet activities and invoice items for that job.”
You can also apply default labels for labor types. For example, you may want to specify apprentice labor on your budget vs. actuals anytime your apprentice is on the job.
“Budget vs. actuals keeps us organized,” Mednikov says. “You can create labels for whatever expenses you want to track, and those labels can be nested for granularity to your heart's content. Default labels allow for a more streamlined process.”
For tracking outside of the budget vs. actuals report, ServiceTitan also offers a project costing report, which can be routed to your inbox on a regular cadence or set up as your custom dashboard so you see it every time you open ServiceTitan.
The #1 newsletter for the trades.
Challenge #2: Inaccurate Actuals in Financial Management
Many construction companies rely on multiple software platforms, which means their financial data isn’t consolidated in one place. This leads to a lack of real-time financial visibility and clarity regarding financial actuals, which means the recorded revenues and expenditures at any given point in time.
“A need arises to have a solution that will integrate all your financial information in one place,” Simonyan says. “ServiceTitan can become that solution for you. It'll provide you a simplified way to track and analyze all your financial information in one place.”
ServiceTitan financial actuals include the total of timesheet data, vendor bills, and invoices balances. You can generate these actuals from materials and equipment or the timesheet. Actuals start calculating as soon as you generate an invoice with materials and equipment, the technician begins work on a job, or when you create a purchase order (PO).
Timesheet Actuals
A technician's actual value is calculated by taking the technician's hourly rate from their profile and multiplying it by the paid working hours they worked on a job. As the technician starts accumulating timesheet data, the labor actuals are going to be accumulated and reflected in the budget vs. actuals table based on the job type and technician labels.
Invoice Actuals
Once you generate an invoice and add materials and equipment to it, an actual generates. For cases where additional work was done outside of the general labor cost, you can add a service task to reflect the cost in the actuals.
Purchase Order Actuals
To generate actuals from a PO, first add a PO or requisition. Then, open the invoice and navigate to invoice closeout. Once the invoice closeout screen opens, it will display all the items procured during your project, as well as items from the sold estimate. Select each item and adjust the quantity, then add it to your invoice.
In order for the data to appear in your actuals table, you must create the vendor bill from your PO. You can either set vendor bills to generate automatically once you receive POs, or create the bills manually.
Challenge #3: Lack of Flexibility in Billing Practices
Depending on the project, construction companies have different billing needs. They struggle when they face an inability to align billing methods with specific circumstances.
Progress billing allows construction companies to bill customers at specific agreed-upon milestones throughout a project. ServiceTitan’s progress billing options lend flexibility to contractors.
“Progress billing through your original sold estimate keeps you very organized,” Mednikov says. “ServiceTitan keeps track of what's already been invoiced for, and it ensures you don't forget to invoice for something or double invoice for something that's already been accounted for. It will only display the items that were in your original estimate or in any change orders. Your variance on your budget versus actuals table will look a lot less scary if you're relying on that original information.”
Invoice Closeout
You can send invoices upon invoice closeout, but what about progress billing? Just add service tasks to your invoice with a decimal amount. For example, if you’re a quarter through the project, input .25 for services, then send the invoice to the contractor.
To add service tasks to closeout, you need to first navigate to settings, go to inventory configurations, and enable the “display services on invoice closeout” option.
Application for Payment
For contractors who require AIA billing, ServiceTitan application for payment meets those needs. To access it, go to the actions drop-down menu and select application for payment, which populates a continuation sheet, also known as a schedule of value.
Multiple billing options allow you to better serve customer needs, leading to repeat business and referrals. Overall, ServiceTitan accounting features allow users to enhance financial visibility and billing flexibility while streamlining the software needed for accurate actuals.
