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Insight · Choosing software

Xero for contractors, and where
the accounts package stops.

It handles CIS properly and it is a good ledger. What it is not built to hold is the job: the measured schedule, the valuation, the retention and the cost you have committed but not yet been invoiced for.

Published ·5 min read·Written by Unibuild

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.

Unibuild is not an accounting system. It does not file VAT, it does not produce statutory accounts, and it is not where your accountant works. If you replaced Xero with it you would have made your life considerably worse. The sensible arrangement for a contracting business of the size this is written for is a construction system that runs the job and an accounts package that keeps the books, with the commercial position handed from one to the other.

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 this touches the platform

Stated as the boundary rather than the pitch, because that is the honest version. Unibuild holds the job: orders as commitments from the moment they are issued, the measured schedule drawn from the priced sections of the quotation where the project was quoted through the platform, applications with their dates and receipts, retention withheld captured against the receipt it came off, and the subcontract exposure report totalling orders, invoices and payments across the ledger. Supplier paperwork goes to your bookkeeping inbox and project folders sit in OneDrive; the integrations page sets out exactly how far each connection goes rather than implying more. It does not do VAT, statutory accounts or payroll filing, and firms that expect one system to do both are usually disappointed by whichever half was bolted on last.

Integrations Financial and invoicing Cost control The CIS deductions guide

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.

Asked most often

The follow-up questions.

Exactly how far each connection goes is set out on the integrations page.

Can I run a construction business on Xero alone?+
For a small contractor with few concurrent jobs, often yes. It becomes difficult when the job needs to be authoritative about things that are not yet transactions: committed cost from issued orders and instructed packages, the measured works schedule an application is calculated from, interim valuations on a statutory timetable, and retention released in two halves on dates a year apart.
Does Xero handle CIS?+
Yes. CIS deductions are calculated automatically on bills and invoices, and contacts can be marked as CIS contractors or subcontractors, with those core features included in the standard subscription plans. Filing CIS monthly returns to HMRC directly from Xero requires the CIS Contractor add-on, which carries a small additional monthly cost.
What is the difference between accounting software and construction job costing?+
A ledger is authoritative about what has happened and is designed to be complete after the fact, because its output is accounts somebody can file. A job needs to be authoritative about what is true now, including commitments that have not become invoices, measured quantities, and valuations. They answer different questions, and one system answering both usually answers one badly.
Do I need to replace Xero if I get construction software?+
No, and you should be wary of anybody suggesting it. A construction platform that runs the job and an accounts package that keeps the books is the normal arrangement. The useful question to ask a vendor is not whether their product replaces the ledger, but what crosses between the two, in which direction, how often, and what still has to be entered twice.
How do I know we have outgrown a single accounts package?+
Five symptoms usually arrive together: somebody maintains a spreadsheet alongside it that everyone trusts more for job cost, applications are produced separately then raised again as invoices, nobody can state a job's cost including commitments without an hour of work, retention is a manual note rather than a tracked balance with dates, and the monthly figure is reliable but three weeks old.
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