Accounting Software for Engineering Firms: A Simple Guide

Engineering firms face unique challenges due to their project-based nature. Unlike businesses selling products or services, engineering firms work on projects with specific start and end dates. Each project has its own budget and timeline, which can be affected by unexpected costs or delays.

Challenges Engineering Firms Face

1. Revenue from Projects: Engineering firms make money based on individual projects, not steady sales. This means they have to manage costs for things like labor, materials, and subcontractors, which is more complicated than running a regular business with consistent revenue.

   
   

2. Managing Project Budgets: Every project has its own financial plan. Engineering firms need good tools to manage cash flow (how money comes in and out), keep track of project timelines, and predict if a project will be profitable.

   
   

3. Unexpected Costs: Problems like design changes, supply shortages, or labor shortages can cause project costs to rise. Firms need to track these changes in real-time and adjust budgets as needed.

   
   

4. Milestone Billing: Engineering projects are often paid based on specific milestones, like when 30% or 60% of a project is completed. This means it’s very important for firms to manage cash flow and make sure payments are received on time.

   
   

5. Time Tracking: Engineering firms need to track the time spent on projects accurately. This helps with billing and also ensures resources (like workers and equipment) are being used effectively.

   
   

6. Regulations: Many engineering firms must follow strict rules, such as safety and environmental regulations. They need to keep accurate financial records to make sure they stay compliant and can deliver projects successfully.

Accounting Software for Engineering Firms

Using the right accounting software for engineering firms can help solve these problems. Here are some of the best options:

A. QuickBooks Online Plus and Advanced

QuickBooks is a popular tool that helps engineering firms track income, expenses, and profitability for each project. In our experience, it works well for mid size firms that want to track income and expenses for separate projects. Many bookkeepers and CPAs work with QBO and finding outside help won't be a problem.

With QBO, you can:

• Set Up Projects: Create a new project and link it to a specific customer.

• Track Separate Lines of Income: Assign income from invoices directly to the project.

• Track Separate Costs: Add costs like labor and materials to each project.

• Compare Estimates to Actual Costs: See how much you expected to spend versus what you actually spent.

• Track Labor Costs: Keep track of how much you’re paying workers and contractors.

• Pull Profitability Reports for Various Projects : View income, expenses, and profit for each project.

B. NetSuite OpenAir

This software is best for larger firms with more complex projects. In addition to the same features that QBO offers, it also  integrates project management with procurement. NetSuite is a niche software and you may have a hard time finding accounting staff who knows this software.

With Nesuite, you can:

• Integrate Project Management and Procurement: Connect project management with procurement for seamless teamwork and accurate information.

• Track Procurement: Monitor materials being sourced, purchased, or transferred in real-time.

• Account for Design Changes: Reflect design changes in updated costs.

• Adapt Procurement Strategies: Choose from various methods to meet project needs.

• Ensure Material Availability: Adjust procurement as project scope changes.

C. Deltek Vision

This software is designed for project-based firms like engineering companies. It combines project accounting with overall financial management, so you can track costs, budgets, and profitability in real time. Again, this is a niche accounting software that many accountants do not have experience with.

With Deltek Vision, you can:

• Track Project Costs: Manage expenses across different project phases and timelines, ensuring your budget stays on track.

• Allocate Resources: Make sure the right engineers are assigned to the right projects.

• Stay Compliant: Keep up with complex tax rules and regulations, especially for government projects, with built-in compliance tracking.

D. Jedox

This software is an advanced planning tool perfect for large engineering firms. It helps manage complex, project-based operations by integrating financial planning, forecasting, and performance tracking across all departments.

With Jedox, you can:

• Create Project-Based Financial Plans: Develop financial plans for each project and adjust them in real-time as project details change.

• Predict and Control Costs: Use scenario planning and cost control features to foresee potential delays, design changes, or resource shortages, helping you stay on budget.

• Track Key Metrics: Monitor performance with real-time data on KPIs and resource usage, while generating automated reports.

• Centralize Data: Bring together information from finance, project management, and HR to get a clear, unified view of project performance.

• Integrate with Other Software: Easily connect with tools like QuickBooks and NetSuite.

Project Management Software for Engineering Firms

A. WorkflowMax

This is a project management tool that integrates seamlessly with Xero accounting software, making it an ideal choice for small engineering firms. It helps manage tasks, timesheets, and billing all in one place.

With WorkflowMax, you can:

• Track Projects Easily: Monitor each project from start to finish, including cost and time tracking at every phase.

• Sync Data Automatically: Use one-click sync to update contact info, invoices, and payment data between WorkflowMax and Xero, reducing manual data entry.

• Generate Invoices Efficiently: Automatically transfer approved invoices from WorkflowMax to Xero for quicker, more accurate billing.

• Track Costs Accurately: Ensure every cost is reflected in financial reports by automatically updating job profitability when supplier invoices are entered into WorkflowMax.

B. Autodesk Construction Cloud (formerly BIM 360)

This software offers powerful project management features that integrate Building Information Modeling (BIM) with project tracking tools, making it ideal for large engineering firms in construction and infrastructure.

With Autodesk Construction Cloud, you can:

• Manage Complex Projects: Collaborate in real-time with architects, engineers, and contractors to keep designs and timelines aligned.

• Control Versions and Documents: Ensure everyone works from the most up-to-date plans and specifications with version control.

• Update Project Status in the Field: Allow engineers and contractors to update project status directly from the field, improving communication and reducing delays.

• Centralize Information: Provide a single source of information, streamlining design data flow and helping teams work together in real-time to track progress and keep projects on schedule and budget.

Invoicing Software for Engineering Firms

A small engineering firm may not need expensive accounting software with multiple integrations. When you are just starting out, all you need is to invoice you clients and collect payments. For these types of situations we recommend the following software:

A. FreshBooks

FreshBooks is an inexpensive accounting software that offers easy invoicing and expense tracking. Many accountants work on this platform and it is easy enoug to learn.

With FreshBooks you can do:

• Time Tracking: Log billable hours for accurate invoices.

• Expense Management: Track project-related expenses and add them to invoices.

• Basic Reporting: Easy-to-understand reports on income and expenses.

  
  

B. Zoho Invoice

Zoho Invoice helps small firms automate invoicing and payment tracking. Zoho corporation produces tons of various business tools and has its own ecosystem and you can scale with it as you grow by adding more and more Zoho apps. You don't need any accounting knowledge to send invoices. This app is also reasonably priced.

With Zoho Invoice, you can do:

• Custom Invoicing: Create invoices with project details.

• Payment Integration: Accept online payments.

• Recurring Invoices: Set up automatic invoices for ongoing projects.

  
  

C. Wave Accounting

Wave is free accounting software that offers invoicing. In our opinion, it’s a bit clunky when it comes to bank reconciliations, but the invoicing feature is solid. I wouldn't recommend doing your accounting in Wave on your own, as I’ve seen many financial errors from DIY business owners.

With Wave, you can do:

• Unlimited Invoicing: Send as many invoices as you need.

• Integrated Payments: Clients can pay directly through the invoice.

• Expense Tracking: Automatically track expenses and project costs.

Final Thoughts

Engineering firms need to choose the right accounting software in order to be able to track their financial activity. Larger firms might go with advanced tools like NetSuite, Deltek Vision, or Autodesk Construction Cloud. Medium-sized firms may find QuickBooks more useful. When you are just starting out, you can use simpler tools like FreshBooks, Zoho Invoice, and Wave Accounting.

And If you ever need help with your accounting issues, please reach out. Most of the engineering firms operate as S Corps, and we can help you with your tax and accounting issues. You are welcome to check out our services here.