Xero for contractors, and where
the accounts package stops.

Xero is a capable accounts package and it handles CIS well: deductions are calculated automatically on bills and invoices as part of the standard plans, with an add-on for filing the monthly returns to HMRC. What a ledger is not built to hold is the job: the measured works schedule, the interim valuation, retention against a subcontract, and cost you have committed but not yet been invoiced for.

What it does well, stated plainly

It is worth starting here, because most writing on this subject is by somebody selling the alternative and it shows.

Xero does the ledger properly. Bank feeds, reconciliation, VAT returns under Making Tax Digital, sales invoicing, purchase ledger, payroll, reporting to your accountant in the format they want. For a contractor it also does CIS: deductions are calculated automatically on bills and invoices, contacts can be marked as CIS contractors or subcontractors, and those core features are part of the ordinary subscription rather than an extra. Filing your monthly CIS returns to HMRC straight from Xero requires the CIS Contractor add-on, which carries a small additional monthly cost.

If somebody tells you a contractor should not be on Xero, be sceptical. Most of the firms this site is written for should be, and should stay.

The distinction that actually matters

An accounts package records transactions. A job needs something different, and the difference is not a feature list.

A ledger is authoritative about what has happened: this invoice was raised, that bill was paid, this is the VAT position. It is designed to be complete and correct after the fact, because its job is to produce accounts somebody can file.

A job needs to be authoritative about what is true now, which includes things that have not become transactions yet. Four of them in particular.

1. Committed cost. The £120,000 subcontract package you instructed last week is a real commitment against the job and it is not an invoice, so it is not in the ledger. A cost position that excludes it always understates, and understates most when commitments are largest. That mechanism is the subject of where spreadsheet job costing breaks, and it applies to a ledger for the same reason.
2. The measured schedule. What was priced, at what rate, and how much of it has been built. This is the thing an application is calculated from, and it is a quantity surveying artefact rather than an accounting one.
3. The interim valuation and application. Not an invoice. A statement of work done with the basis of its calculation, on a statutory timetable, capable in the right circumstances of standing as the payment notice. That is set out in an application that does not come back rejected.
4. Retention. Withheld on every valuation, released in two halves on dates a year or more apart, and behaving unlike any other debtor in the ledger.

The ledger is right about last month. The job is a question about this afternoon. They are different questions and one system answering both is usually answering one of them badly.

How firms discover the gap

Rarely as a decision. Usually as a set of symptoms that arrive together.

• Somebody maintains a spreadsheet alongside the accounts package, and it is the spreadsheet everyone actually trusts for job cost.
• Applications are produced in Word or Excel and then raised again as invoices, so the same figures are entered twice in different shapes.
• Nobody can say what a job has cost including commitments without a person doing an hour of work.
• Retention exists as a manual note somewhere rather than as a tracked balance with dates.
• The monthly management figure is reliable and three weeks old, which for a live job is a historical document.

Any one of those is normal. All five together is the shape of a firm that has outgrown a single system rather than a firm that has chosen the wrong one.

The answer is both, not either

This is where a lot of vendor writing goes wrong, and it is worth being explicit about our own position because we sell one of the two.

Your accounts package stays: it keeps the books, and it is where your accountant works. Unibuild runs the job up to it. The sensible arrangement for a contracting business of the size this is written for is a job system that runs the work and an accounts package that keeps the books, with the commercial position handed from one to the other. Unibuild syncs with Xero, as it does with QuickBooks and Sage 50, so the handover happens without anybody retyping it.

Which means the question to ask a vendor is not whether their product replaces your ledger. It is what crosses between the two, in which direction, how often, and what still has to be typed twice. Ask that in the demo and write the answer down, because it is the difference between two systems and two systems plus a person.

Where to start, on Monday

Ask one question of whoever produces your monthly figures: how long does it take you to tell me what job seven has cost, including everything we have ordered but not been invoiced for. The answer is the size of the gap, in hours, every month.

Then decide honestly whether that is a problem yet. For a firm running three jobs with one commercial manager, an hour a month is not a reason to buy anything. For a firm running fifteen with three, it is a week of somebody's month and a position that is never current.