Best Accounting Software for Contractors 2026
Construction accounting platforms built for contractors, builders, and trades
By Toolradar Editorial Team · Updated
Contractors need accounting software with robust job costing, progress billing, and change order management. QuickBooks leads with construction-specific features and ecosystem, FreshBooks excels for smaller trades prioritizing simplicity, Xero provides strong project tracking, Wave offers free options for startups, and Sage delivers enterprise-grade construction accounting.
Contractor accounting differs fundamentally from standard business accounting. Construction businesses must track costs and revenue by project, manage retainage on invoices, handle progress billing based on work completed, track change orders that affect profitability, manage subcontractor payments with lien waivers, and generate work-in-progress reports for bonding and lending. Generic accounting software lacks these capabilities, forcing contractors into spreadsheets and manual tracking.
The construction accounting market has matured significantly. Purpose-built platforms now offer job costing that tracks every cost to specific projects, progress invoicing tied to completion percentages or payment schedules, change order management that preserves original budgets while tracking modifications, and financial reporting designed for contractor needs. This guide evaluates platforms based on actual construction accounting requirements, not generic small business features.
What It Is
Contractor accounting software manages the financial operations of construction businesses, including job costing that allocates all costs to specific projects, progress billing for percentage-of-completion invoicing, retainage tracking for amounts held from invoices and subcontractor payments, change order management, work-in-progress reporting, and subcontractor management with AIA billing formats and lien waivers. It provides project-level profitability visibility that standard business accounting cannot deliver.
Modern contractor accounting platforms integrate estimating, project management, time tracking, and field operations with financial systems. They handle complex billing scenarios like AIA G702/G703 applications for payment, track committed costs from purchase orders and subcontracts against budgets, manage equipment costs and depreciation, and generate compliance reports for bonding companies and construction lenders.
Why It Matters
Poor contractor accounting destroys profitability. Without job costing, contractors cannot identify which project types make money and which lose money. Inaccurate work-in-progress reporting leads to cash flow surprises when projects finish. Manual change order tracking means scope creep erodes margins unnoticed. Spreadsheet-based systems break down as project counts increase. Missing retainage tracking creates payment collection problems.
The right accounting software protects contractor profitability and cash flow. Accurate job costing reveals true project margins and informs estimating improvements. Automated progress billing based on completion percentages accelerates cash collection. Change order tracking prevents scope creep from destroying margins. Work-in-progress reporting enables proactive project management. Integration with field operations eliminates duplicate data entry and improves accuracy.
Key Features to Look For
Track all costs (labor, materials, equipment, subcontractors) by project with budget comparison
Invoice based on percentage complete, milestones, or AIA billing formats with retainage
Track change orders separately from original budgets with approval workflows and margin impact
Manage amounts held from customer invoices and subcontractor payments with aging reports
Generate WIP reports showing job status, costs to date, estimated costs to complete, and projected profit
Track subcontracts, manage payments, collect lien waivers, and generate 1099s
Allocate owned equipment costs to jobs and track rental equipment by project
Evaluation Checklist
Pricing Comparison
| Provider | Starting Price | Free Plan | Best For |
|---|---|---|---|
| Wave | Free | Yes | New contractor startups |
| FreshBooks | $21/mo | No | Smaller trades |
| Xero | $20/mo | No | Cloud project tracking |
| QuickBooks | $35/mo | No | Established contractors |
| Sage 100 Contractor | Custom pricing | No | Large GCs & builders |
Prices shown are entry-level plans. Construction-specific editions and job costing add-ons may increase costs.
Top Picks
Based on features, user feedback, and value for money.
Established contractors needing robust job costing with construction app integrations
Smaller contractors and trades prioritizing ease of use and mobile access
Xero
Contractors wanting cloud flexibility with construction app ecosystem
Wave
New contractors and small trades on minimal budgets
Sage
Large contractors and GCs requiring sophisticated construction accounting
Mistakes to Avoid
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Choosing generic business accounting without job costing and then trying to force-fit it
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Underestimating the importance of change order tracking until margin erosion becomes severe
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Not integrating time tracking and field apps with accounting, causing duplicate entry
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Selecting software based on price alone without considering total cost of manual processes
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Not involving the project manager or field supervisor in software selection
Expert Tips
- →
Set up a detailed cost code structure aligned with your estimating before importing jobs
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Enter budgets from estimates into accounting to enable real-time budget vs actual tracking
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Use purchase orders and subcontracts to track committed costs, not just actual invoices received
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Link time tracking apps directly to job costing to eliminate manual timesheet entry
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Run job profitability reports monthly, not just at project completion, to catch problems early
Red Flags to Watch For
- !No ability to allocate costs to specific jobs or projects
- !Missing progress billing or retainage tracking features
- !Requires complex workarounds to track change orders
- !Cannot generate contractor-specific reports like WIP or job profitability
- !Limited or no integrations with construction management tools
The Bottom Line
Contractors should prioritize accounting software with construction-specific features over generic business tools. QuickBooks Desktop Contractor remains the industry standard for established contractors needing robust job costing and integrations. FreshBooks works well for smaller trades prioritizing simplicity over advanced features. Sage serves large contractors with complex multi-project accounting. The right choice depends on contractor size, project complexity, and existing construction management technology.
Frequently Asked Questions
What is job costing and why is it essential for contractors?
Job costing tracks all project costs (labor, materials, equipment, subcontractors) separately for each job and compares them to budgets and bids. This reveals true project profitability, identifies where estimates were off, shows which project types make money, enables informed pricing for future work, and helps spot cost overruns early. Without job costing, contractors only know overall company profitability but cannot tell which jobs made or lost money, making it impossible to improve estimating or project management.
Do I need construction-specific accounting software or can I use QuickBooks Online?
QuickBooks Online can work for very small contractors with simple projects if you use projects/sub-customers for basic job tracking. However, it lacks progress billing, retainage management, change order tracking, work-in-progress reports, and committed cost tracking. QuickBooks Desktop Contractor Edition or dedicated construction software becomes necessary as you grow beyond a few concurrent projects, need to bill based on completion percentage, manage significant retainage, or require detailed job costing. The investment pays for itself by improving margin management.
How do I handle retainage in contractor accounting?
Retainage (typically 5-10% held from progress invoices until completion) must be tracked separately as a receivable aging beyond the standard 30/60/90 day buckets. Best practice is to set up separate retainage receivable and payable accounts, create retainage invoices when releasing held amounts, run retainage aging reports to identify old uncollected amounts, and match retainage held from your invoices with retainage you hold from subcontractors. Proper tracking prevents cash flow surprises and ensures you collect everything owed.
Should contractor accounting software integrate with project management tools?
Integration is highly valuable for contractors managing multiple projects. Manual transfer of estimates to accounting, duplicate entry of time and expenses, and reconciling project status between systems wastes time and creates errors. Direct integration automatically syncs budgets from estimates, imports time and expenses from field apps, updates project status across systems, and provides real-time job costing visibility. For contractors with more than a few concurrent projects, this integration is worth prioritizing during software selection.
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