Table of Contents
Financial Management User Guide
For Head Contractors
This user guide provides head contractors with information about how to use Procore's Project Financials tools to streamline your financial business processes across your project's lifecycles.
Some of the things you'll learn in this guide include:
Work Breakdown Structure Setup
The first step when setting up Procore's Project Financials tools in a Procore project is to create your company's Work Breakdown Structure. You also have the option to create a unique project level WBS.
Procore's default Work Breakdown Structure includes two (2) default segments: cost code and cost type. It also includes an optional sub job segment that lets you add sub jobs to a project. Segments are the building blocks that define your company's budget code structure. To learn more about segments, see What are segments and segment items?
- Default: Cost Code Segment. Procore's default 'Cost Code' segment is a tiered segment that aligns with the 17 Division cost code structure of the CSI MasterFormat®. See What are Procore's Default Cost Codes? You can use the default cost codes or you can customise your cost code segment by adding cost codes manually as segment items. You can also import your cost codes using the Procore Imports app. The import process allows you add or edit segment items but cannot be used to delete any existing segment items.
- Default: Cost Type Segment. In Procore, cost types are a way to identify and classify your project's job costs. They can also be used to generate reports. To learn more, see What are Procore's default cost types?
- Optional: Sub Job Segment. In Procore, a sub job allows you to compartmentalise job costs within a project. Once they are added to Procore (or imported via an integrated ERP system) you can monitor your project budgets and costs against them to help you better determine if you are making money on your project.
- Optional: Custom Segments. Your company can name custom segments anything you want. You can also define the number of alphanumeric characters you want to represent each segment's coding scheme. Custom segments can also be combined with Procore's default segments when configuring your company's budget code structure.
Many companies design their budget code structure to align with the CSI MasterFormat. Other companies decide to implement a budget code structure that is unique to their industry, organisation or project environment. Regardless of the structure, you can perform your own imports using the Procore Imports app. You can also Request to Import Segment Items for WBS.
To learn more about WBS, see the Work Breakdown Structure landing page. We recommend reading About Work Breakdown Structure and reviewing the steps in Create Your Company's Default Work Breakdown Structure and Create Your Project's Work Breakdown Structure with your team.
Procore's Budget tool helps your project team efficiently manage your project's budget. It is designed to help your team make informed financial decisions, track expenses against your budget in real-time, analyse historical snapshots, input detailed forecasts and offers deeper visibility into the financial status of your project.
- Add Your Project's Budget Data. When getting started on a project, the first step is to Set up a Budget in a New Procore Project. You can choose from two methods: (1) Add a Budget Line Item directly to the budget tool or (2) Download and complete a budget template and complete the steps to Import a Budget.
- Configure Your Project's Budget Views. After adding your project's budget data, your Procore Administrator might want to explore our dynamic and customisable budget views. For details, see Set up a New Budget View. You can set up one or multiple budget views, along with a wide variety of data columns, such as Original Budget Amount, Budget Changes, Revised Budget, Pending Budget Changes and more. You can also actively manage and monitor your project's budget using the 'Forecast to Complete' feature. For details, see Use the Forecast To Complete Feature.
- Identify and Track Trends with the Procore Forecasting View. Designed for owners (and contractors) who want to avoid cost overruns, your Procore Administrator can also request to enable the forecasting view in Procore. This lets you view how your construction project's cash flows over time by spreading the 'Project Cost to Complete' column value (or any column you define) across a time period. You can then perform line-by-line analysis to make informed adjustments to your budget allocation. To learn more, see Set Up a New Forecasting View.
- Utilise Data Collected in the Field to Track Labour Costs and Production Quantities. For customers that have purchased Procore's Workforce Management and Field Productivity tools, your budget can be set to automatically Add a Budget View for Real-Time Labour Costing and Set Up the Procore Labour Productivity Cost Budget View.
- Reallocate Funds from One Line Item to Another Using Budget Changes. After you've locked your original budget and set up the other tools listed in this guide, you can use the budget changes feature to transfer money between budget codes. For example, if you have cost savings related to one budget code because it came in under budget, but expect another budget code to come in over budget, you can reallocate funds from the first budget code and add it to the latter budget code as a contingency. Budget changes only appear on the Budget tool, so your vendors will not see your internal adjustments. For details, see Create Budget Changes
To learn what else you can do with the Budget tool, see Budget.
Head Contracts Tool
After setting up the Budget tool, you can begin creating one or multiple head contracts for your project. With the Head Contracts tool, your team can replace stacks of paper and expensive printer costs with a central location for digital contract management.
- Set Up Your Head Contracts. While most Procore customers create a single head contract for a single construction project, project teams do have the option to create multiple head contracts in the Head Contracts tool. For details, see Create Head Contacts. Similar to budget, you can also choose from two methods for setting up your head contract: (1) You can manually Update the Schedule of Values on a Head Contract or (2) you can Import a Head Contract SOV from a CSV File. When finished with the initial setup, simply approve it. See Approve a Head Contract.
TipDoes your construction project have multiple funding sources or delivery methods? Learn why some Procore clients decide to create multiple head contracts on their Procore project. This is helpful when you have a need to divide the scope of work on a project into multiple phases or stages, however, doing so does present a few considerations. For more information, see Are there any system limitations when projects have multiple head contracts?
- Create and Manage Head Contract Progress Claim. After your head contract is set and you've set up the Commitments tool as described below, you can also create and manage your head contract progress claim. An owner progress claim is an itemized record of a financial transaction between a project owner and a company responsible for completing work. Typically, it is issued by a head contractor and submitted to a project owner to signal that a payment is due for completed work. See Create an Owner Progress Claim.
- Create a Payments Received Log. After you receive your payment, you can also create a log to track the payments you've received. Your budget and budget reports are automatically updated to reflect your entries. For details, see Create a Payment Received for a Head Contract.
To learn what else you can do with the Head Contracts tool, see Head Contracts.
After your contract(s) are approved and completed in the Head Contracts tool, you can begin setting up your project's financial commitments. In Procore, you can create two types of 'commitments': subcontracts and purchase orders.
- Set Up Your Contract Configuration, Dates, Distribution Lists and Settings. Your company's Procore Administrator can work with you to define your project's default contract configuration. This is an important step before you start creating commitments on a project. You can choose the number of variation tiers for your commitments. You can also enable a variety of dates to use on your contracts by default. Settings also include default distribution list settings, your default accounting methods, setting a retention percent (if applicable) and deciding to enable financial markup or payments by default. For details, see Configure Settings: Commitments.
- Create Your Project's Purchase Orders. In Procore, a Purchase Order (PO) is a documented financial commitment that details the types, quantities and agreed-upon prices for products or services. As part of the procurement process, purchase orders are created by a 'buyer' (for example, a head contractor) and issued to a 'seller' (for example, a subcontractor) to cover the cost of a contract. Once accepted by the 'seller,' a purchase order represents an agreement between the two parties. See Create a Purchase Order.
- Create Your Project's Subcontracts. A subcontract is a contractual agreement between a general contracting company and the subcontractors who perform the scope of work. In Procore, there are two ways to create a subcontract: (1) You can Award a Winning Tender and Convert it into a Subcontract or you can (2) directly Create a Subcontract in the Commitments tool.
- Create Subcontractor Progress Claims and Manage Progress Claim Contacts. Using the Commitments or Invoicing tool, you can also Create a Progress Claim on Behalf of a Progress Claim Contact or you can provide your subcontractor's progress claim contacts with the appropriate permissions to access their purchase orders and subcontracts. See Add Progress Claim Contacts to a Purchase Order or Subcontract. Users with 'Admin' permission on the Commitments tool can also use those permissions to manage progress claims with the Invoicing Tool.
- Create a Payments Issued Log. After you start issuing payments on your project, you can create a log to track the payments you've issued. Your budget and budget reports are automatically updated to reflect your entries. See Add Payments Issued.
To learn what else you can do with the Commitments tool, see Commitments.
Change Management Tools
Next, start learning about Procore's change management tools. There are two options for setting up these tools: (1) Enable the Variations and Change Events tools or, (2) Enable only the Variations tool.
Variations with Change Events
Change events are created for anything on a project that looks like it may create an additional cost. Creating a change event allows you to prepare for the cost of a change before it becomes an actual cost. After creating a change event, you can then create an RFQ (Request for Quote), which is sent to the appropriate subcontractors for pricing. When RFQs are created and responded to by the assigned subcontractors, variations can then be created based upon the submitted quote.
- Configure Your Variation Tier Settings. You can choose between a one (1)-, two (2)- and three (3)-tier variation setting. Each tier adds a layer to your team's overall change management workflow. A lower number of tiers offers the most straightforward workflow. An increased number of tiers provides your team with a more complex workflow, but gives your team more control over changes. The most common settings among Procore users are to use the one (1) or two (2) tier setting. To learn more, see What are the different variation tier settings in Project Financials? Once you've decided, you can Configure the Number of Head Contract Variation Tiers and Configure the Number of Commitment Variation Tiers.
- Create Change Events. On a construction project, a change event is any change that affects the original scope of a construction project. There are numerous ways to create change events in Procore. In addition to using the Change Events tool (see Create a Change Event), you can also use any of the options available in the supported Procore tool or using Procore's mobile platform. For details on those options, see Which Procore tools can I use to create a change event?
- Create RFQs from Change Events and Review RFQ Responses. If you need to create an RFQ for your subcontractors to submit pricing, see Create RFQs from a Change Event. You can then review your subcontractor's quotes to determine if you want to move ahead with creating a variation. See Review RFQ Responses.
- Create Variations. You can create two types of changes orders in Procore:
- A Commitment Variation can be created before or after an RFQ response is submitted. See Create a Commitment Variation from a Change Event.
- A Head Potential Variation can be created before or after an RFQ response is submitted. See Create a Head Potential Variation From a Change Event.
To learn what else you can do with the Change Events tool, see Change Events.
Variations without Change Events
If your team decides not to enable the Change Events tool, you can still use the Variations tool to account for additional costs. For most Procore customers, this change management workflow starts off by creating a Potential Variation.
- Create a Potential Variation. Use a potential variation to manage any additional costs affecting the head contract. When creating a potential variation, you can only enter a dollar amount. Later, when you update the Schedule of Values (SOV) for the potential variation, you'll have the option to select a budget code. Ideally, the potential variation will affect a budget code already on the project's budget. This allows you to see the budget increase in the project's Budget tool. See Create a Potential Variation for a Head Contract.
- Create a Commitment Variation. After the potential variation is created, you move on to create a commitment variation. The commitment variation acts as a request for pricing from the subcontractor who will be responsible for completing the scope of work that you outlined in the potential variation. You can compare the commitment variation to the corresponding potential variation and view your variance between the two. To learn more, see Create a Commitment Variation from a Head Contract Variation.
- Create a Variation Request. After you've created potential variations, you can package one or multiple potential variations into variation requests. Variation requests are typically the documents that are submitted for approval and can be used for submitting either individual potential variations or for grouping potential variations in order to streamline the review and approval process. See Create a Variation Request (VR).
- Create a Head Contract Variation. Next, you can begin creating variations. Note that when you set a variation's status set to Pending, it appears in the 'Pending Budget Changes' column of the Budget tool. After the head contract variation is set to Approved, the total dollar amount change is reflected in the 'Approved VARs' column of the Budget tool. Approved variations can be added to head contract progress claim. For details, see Create a Head Contract Variation.
- Create a Commitment Variation. A commitment variation outlines variations in costs that affect the contract between the general contracting company and a vendor or subcontractor. Once you have marked the commitment variation as approved, the dollar change will be reflected in the "Committed Costs" column on the Budget tool. Commitments and potential commitment variations with a status of "Pending" will show up in the "Pending Cost Changes" column on the Budget tool. See Create a Commitment Variation.
To learn what else you can do with the Variations tool, see Variations
Procore's Invoicing tool uses the user permission granted in the Commitments and Head Contracts tool. As your project progresses and the contracts have been created and approved, subcontractors can bill you for completed work via subcontractor progress claims. You can also create owner progress claims, which can then be emailed to the owner or the party that is being requested for payment.
- Manage Billing Periods. In Procore, a billing period defines the billing cycle that is used for invoicing your project's subcontractors. In addition to defining the frequency of the billing period (for example, monthly or weekly), it also defines the billing period's start date, the progress claim's due date and the billing period's end date. To learn how to create a billing period with the Invoicing tool, see Create Manual Billing Periods and Create Automatic Billing Periods.
- Create and Manage Subcontractor Progress Claims. With the Invoicing tool, you can keep user permissions restricted to your project team and Create a Progress Claim on Behalf of a Progress Claim Contact or you can provide your subcontractor's progress claim contacts with the appropriate permissions to access their purchase orders and subcontracts. See Add Progress Claim Contacts to a Purchase Order or Subcontract. Then, when you are ready for your subcontractors to bill you for their work, you can Send an 'Invite to Bill' to a Progress Claim Contact and your subcontractors can then Submit a New Progress Claim as a Progress Claim Contact. You can then review and approve these progress claims.
To learn what else you can do with the Invoicing tool, see Invoicing
Direct Costs Tool
In Procore, the term direct cost is used to refer to a cost on a construction project that is NOT associated with a commitment. Using the Direct Costs tool, you can create these items:
- Progress Claims. Create a direct cost for a paper progress claim from a non-contracted vendor for items such as printer ink, computer paper or postage.
- Expenses. Create a direct cost for expenses that might include computer equipment, telephones or internal equipment rentals.
- Payroll. Create a direct cost for monthly payroll costs classified by cost code, so that payroll amounts reflect each month on the budget.
To learn how to create a direct cost, see Create a Direct Cost.
To learn what else you can do with the Direct Costs tool, see Direct Costs