By Garett Fuller, Foundation Software

There comes a time for any good subcontractor when new market opportunities come knocking. Maybe someone on your team suggests taking on a job in a market segment you’ve never done before. Maybe you’ve saturated most of the current market in your area, and business growth now means you must diversify. Whatever the reason, when the work is steady and your crews are sharp, a new market segment might start to look like a smart move.

And it often is. A new market segment gives you something to lean on when one market cools off. It puts you in front of new owners and new general contractors. And the skills your crew already have can open doors you didn’t know were there.

But here’s what often gets overlooked. The field side of a new market segment is usually the part you already know how to do. The back office is where companies get tripped up. A new segment can mean new pay rules, new billing requirements, new codes and more compliance to prove. Before you say yes to the work, make sure the tech stack behind your business is ready to say yes, too.

Now, there are lots of parts and pieces when it comes to construction software, but it’s mainly your accounting software that acts as the backbone of how you run jobs, payroll, billing and reporting. While it’s important to consider tools that sit beside it, like estimating and time tracking, accounting is the main software component you should assess first.

1. Accounting Software Should be Construction-Specific

There’s plenty of software out there that was built to be used by any business and then given a construction label after the fact. Entering a new construction market segment will quickly show you whether yours is one of them.

Before you diversify, make sure your accounting software was built for how construction really works. It should handle job costing across multiple profit centers so you can see each segment on its own. It should track retainage correctly, since terms can differ between public and private work. And it should give you reports, like cash flow and WIP, that make sense for a contractor.

These reports matter more than you might think. If your new segment includes public work, you’ll typically need performance and payment bonds, and sureties look closely at your financial statements and WIP schedule when deciding how much work they’ll back. Your books can shape how much of that new segment you’ll be able to bid.

2. Can Your Software Handle Multiple Rates at Once?

Different segments often mean different pay structures. Public work may bring prevailing wage and certified payroll. Some markets are union and others aren’t. And larger public projects may come with a project labor agreement that sets its own terms. 

Your accounting system’s payroll and job costing need to handle multiple rate structures cleanly, and your field and office teams need clear communication about which rate applies to which job, crew and segment.

Time tracking matters here, too. As crews move between roles, segments and jobsites, you need a tool that lets workers switch tasks and locations easily and feeds those hours straight into payroll without losing accuracy. When you find construction accounting software that gives you what you need, be sure it integrates with the time tracking tool your crew will use on the job.

3. Don’t Neglect Cost Tracking and Scheduling

Cost tracking is essential for construction because every job is its own profit center and each will have its own complexities that need to be monitored to prevent overruns.  

For example, say you mostly do private commercial work, and you take on your first public school project. You want to know, job by job, that you’re still turning the profit you’d expect even with prevailing wages to now track.

When it comes to job costing, you should be able to see, on any given day, how many labor hours, how much equipment, time and what other costs went into a specific project, not just how many hours your crew logged overall. Then compare it to your estimate as the job moves along, so you can see how the new segment stacks up against the work you already know.

This is also where cost codes come in. Much of what you already have will carry over. Your core work uses the same cost codes whether the job is an office building or a school. But a new segment may include work you’ve never had to track before, like bond premiums, after-hours or weekend premium pay to work around the school day, or time spent on badging and security check-in. Those need their own codes. Without them, costs will land in a generic overhead code, making it much harder to tell if the job is actually making the profit it should.

Scheduling also plays a part, since your crews might split their time between different jobs in different segments and get pulled onto another job on short notice. Your scheduling tools should show where every crew is at any moment, and your cost tracking should follow them.

4. Learn the Compliance Requirements for Your New Segment

A new segment can bring compliance requirements you’ve never dealt with, and a few of these requirements deserve special attention.

Let’s start with wages. If you’re moving into public work with prevailing wage, you need accurate tracking of the work your team is actually doing, because rates are tied to the work performed. On a job site, for example, it’s not uncommon for one worker to spend the morning on general labor and the afternoon running an excavator, and those can be two different classifications with two different rates. Your time tracking and reporting needs to capture exactly how many hours went to each, or you could end up owing the higher rate for all of them. Prevailing wage work can also bring fringe benefit calculations and apprentice-to-journeyman ratios you may not be used to. 

But don’t just stop there. Many construction accounting systems can integrate with safety and project management systems. A connected system that tracks worker training, certification and requirements — like background checks for crews working on school grounds — alongside your wage rates keeps your compliance records in one place. It also helps you decide faster who’s qualified for which projects.

And if the day comes when you get audited, whether for prevailing wage, union fringe benefits or an owner’s compliance review, having clean, accessible records already built into your system is what can really save you.

5. Prioritize Real-Time Visibility

More construction market segments mean more jobs, more crews and more numbers to keep an eye on.

That’s why good reporting is a must. You want a dashboard that shows you, all in one place, how every job across every segment is performing right now, not at month end. That’s how you catch a slipping schedule, a tightening margin or field costs running ahead of budget while there’s still time to fix them.

You also want WIP and cash flow reports at the click of a button, whenever you need them, instead of waiting for someone to pull them together by hand. Just remember those reports are only as good as cost-to-complete projects your project managers keep current. Cash flow deserves extra attention if your new segment is public work, where payments can often come slower and retainage can be held longer than you’re used to.

Next Steps if Your Technology Falls Short

If working through this list turned up gaps in your system, here’s how I’d move forward.

First, build a clear list of must-have features based on what a new segment will require. Don’t just think generally — get specific. 

If your new work involves certified payroll, add that to the list. If it uses a different billing structure than what you’re used to, say unit pricing instead of time and materials, or AIA-style progress billing instead of straight invoicing, put that on the list too. 

The clearer you are about what your company needs, the easier it becomes to tell which vendors can genuinely meet them and which are just giving you lip service. 

Pay close attention to construction-specific capabilities like job costing, retainage and reporting, since these are the features that reveal how well a system can keep up with more complexity. 

Be sure to add “good support” to the list. When you’re investing in a long-term solution you want to know that there will be a responsive team behind your tech that’ll help whenever you need. 

And before you start looking for software, it’s also worth talking to the part of your team who will feel this change most directly, like your payroll, accounting and project management staff. They’re the ones who’ll run into workflow challenges first, and they often know exactly where an existing system could fail.

Finally, always get demos and ask direct questions: can this handle multiple rate structures? Can it isolate cost and revenue by project and by segment? 

Even if their answer is yes, have them show you how everything flows. Does it feel like a fit for your business? 

It’s better to find the gaps now, while you’re still planning, than after you’ve won the first job.

About the author:

Garett Fuller is a regional sales manager for Foundation Software, the developer of FOUNDATION construction accounting software. With more than 20 years of experience serving the construction industry, he has worked with thousands of contractors and subcontractors to provide software that fits their companies’ specific needs. He is passionate about helping contractors learn how to leverage new construction technology to enhance their efficiency.