Accounting as a service means hiring an outside team to take responsibility for agreed parts of your accounting on an ongoing basis. For a contractor, that might include job costing, the monthly close, WIP preparation, and financial reporting. The scope depends on what your company needs and what your employees already handle.
The term came up when Jeff Sample described Levvigo’s work on The ConTechCrew podcast. The acronym got a laugh. The useful part of the discussion was the idea behind it: a contractor should be able to pay for a defined accounting function and know who’s responsible for getting it done.
That sounds straightforward. Making it work takes more than agreeing to a monthly fee.
Start with what needs to get done
A contractor can have someone entering invoices, running payroll, and reconciling the bank and still be missing important accounting work. Someone also needs to review job costs, account for costs that haven’t been invoiced yet, prepare the WIP, and make sure the financial statements agree with the supporting schedules.
Those responsibilities often sit between people. The bookkeeper expects the owner to review the jobs. The owner assumes the accountant has reviewed them. The outside CPA gets involved at year-end. Meanwhile, the monthly reports go out without anyone working through the estimates behind them.
An accounting service should close those gaps. Before discussing software or pricing, identify the work, the person responsible for preparing it, and the person responsible for reviewing it. If your employees already handle accounts payable well, you may need help with the close and WIP. If you’re hiring for an open accounting position, the scope may be broader.
The monthly close needs a calendar
A monthly fee should come with a clear agreement about when the work will be finished. That requires deadlines on both sides.
Your accounting team needs timecards, vendor invoices, billing information, and updates from the project managers. The service provider needs time to reconcile accounts, review the job costs, resolve questions, and prepare the reports. Agree on when those inputs are due and when ownership will receive the financial package.
The calendar also needs a way to handle missing information. If a subcontractor has performed work but hasn’t submitted an invoice, someone needs to determine whether a cost accrual is required. Leaving it out because the invoice hasn’t arrived can understate job costs and distort reported profit.
When information arrives after the reports are issued, there should be a consistent process for deciding whether to revise the reports or record the item in the next period. Your provider should be able to explain that decision and its effect. A close date has limited value if the numbers keep changing without an explanation.
Job costing has to connect to the work in the field
Posting an expense to a job is only part of job costing. The accounting team needs to understand what the cost represents and whether it belongs in the period being reported.
Take labor. If the job report includes wages but leaves payroll taxes, workers’ compensation, and other applicable labor burden in overhead, the owner needs to understand that presentation. Otherwise, the margin on the job report may mean something different from what the estimator or project manager expects.
Equipment and shared field costs raise similar questions. The company needs a reasonable, consistent way to assign those costs, and the accounting team needs to apply it. Changing the approach from month to month makes comparisons less useful.
The outside team also needs access to someone who can answer job questions. An accountant can identify an unusual cost or a missing billing. The project manager is usually better positioned to explain the work performed, an unresolved change order, or the amount of labor still required. Both perspectives belong in the review.
WIP preparation includes reviewing the estimates
A WIP schedule can calculate correctly and still give you a poor estimate of job profitability.
Suppose a project manager expects to spend another $70,000 on labor, but the schedule still carries last month’s $50,000 estimate. The accounting team can reconcile every posted cost and still overstate expected profit by $20,000 if that forecast doesn’t get updated.
The provider should have a process for reviewing estimated costs to complete with the people running the jobs. When the expected margin changes, the discussion should establish why. It might be additional work, lower productivity, a purchasing issue, or a correction to the original estimate. Keep the explanation with the schedule so the next month’s review has something to refer back to.
For contractors recognizing revenue as work progresses, the WIP also needs to support the revenue and related overbilling and underbilling balances in the financial statements. The team should reconcile the WIP to the P&L and general ledger, using consistent reporting periods and accounting for completed jobs. Preparing the schedule without recording the necessary adjustment leaves the financial statements unfinished.
Your company keeps responsibility for the decisions
Outsourcing accounting doesn’t remove the need for oversight inside your company.
Your team still needs to approve purchases, confirm that work was performed, authorize payments, and provide reliable project information. Ownership needs to review the reports and make decisions about staffing, equipment, distributions, and new work.
Payment authority deserves particular attention. Preparing a payment and approving it are separate responsibilities. Decide who can create or change vendor records, who prepares payments, and who releases the money. Give people access appropriate to their work and review that access when responsibilities change.
The same clarity applies to the WIP. An outside accountant can lead the review and challenge an estimate. The contractor still needs to provide an informed assessment of what remains to finish the job. That responsibility can’t be transferred by sending someone a spreadsheet.
Pricing should follow a written scope
Accounting as a service may be priced as a fixed monthly fee, hourly work, or a combination. The useful comparison is what each arrangement includes.
A fee for reconciliations and basic financial statements isn’t directly comparable to a fee that includes construction job costing, WIP preparation, project manager reviews, and a monthly meeting with the owner. Transaction volume, payroll complexity, the number of entities, and the condition of the existing records also affect the work.
Separate the initial cleanup from the recurring service. Bringing six months of reconciliations current or correcting a job-cost setup is different work from maintaining it once it’s right. Ask how that work will be priced and when the regular monthly scope begins.
The agreement should also address work outside the normal scope. Year-end support, a software conversion, a new entity, or a lender’s additional reporting request can require more time. Discuss how those requests will be approved and billed before they arise.
Software and AI still need accounting review
Software can help capture invoices, suggest coding, match transactions, and move information between systems. AI can assist with some of that work. The provider still needs to check the result.
An invoice can be entered for the correct amount and assigned to the wrong job. A duplicate can look like a legitimate second payment. A coding suggestion can repeat an error from an earlier transaction. Your provider should be able to explain which work is automated, what gets reviewed, and how exceptions are resolved.
Access to an accounting system also doesn’t establish that the monthly work has been completed. Ask to see the reconciliations, the WIP review, and the support for adjustments. Those records help you evaluate the service and make it easier for another employee or accountant to follow the work later.
Evaluate the work before expanding the engagement
A defined initial scope gives both sides a way to assess the arrangement. Agree on the reports, deadlines, required inputs, and review responsibilities. Then look at what gets delivered over successive months.
Are the reconciliations current? Does the WIP agree with the financial statements? Can the accounting team explain changes in job margins? Are unresolved items documented and followed up? Are your project managers getting questions they can answer while the information is still current?
Those are practical ways to judge accounting as a service. The label matters less than whether the work gets done consistently and whether you understand the numbers you’re using to run the company.
Get the right accounting support for your company
Levvigo provides outsourced construction accounting and construction controller services, including job costing, month-end close, WIP, and financial reporting. We work alongside your existing employees and agree on the responsibilities and reporting schedule before the recurring work begins.
If you need help getting that work covered, book a call with me. We’ll talk through what your team handles today and where you need support.
