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Financial Management User Guide

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For Owners

This user guide provides project owners with information about how to use Procore's Project Financials tools to streamline your financial business processes across your project's lifecycle. You'll learn how to properly configure each financial tool as well as perform common financial tasks according to Procore's recommended best practices. 

Some of the things you'll learn in this guide include:
  • How to set up your project's cost codes. Review Procore's default cost code structure and learn the basics for setting up project cost codes. See Cost Codes Setup.
  • How to add or import an accurate project budget. Learn how to add budget line items to your project, configure and assign budget views to your project, and how to set up a forecasting view to identify and track critical project costs. Use data collected from the field to track your project's labour costs and to register production quantities in your budget. Learn how to create budget modifications to reallocate funds from one budget line item to another.  See Budget Setup.
  • How to create one (or multiple) head contracts for your project. Set up your head contract tool and learn about the considerations to keep in mind if your project has multiple funding sources or delivery methods. Manage the owner progress claim process and create a payment received register. See Head Contracts.
  • How to manage your project's purchase orders and subcontracts. Learn about the Commitments tool's configuration settings and how to create purchase orders and subcontracts. Designate progress claim contacts on your contracts. See Commitments.
  • How to improve oversight and management project changes. Choose between managing variations with or without the Change Events tool. Configure your variation tier settings for your contracts. Bring change management to the field––facilitating faster approvals, more accurate communication and eliminating the need to proceed at risk. See Change Management with Change Events and Change Management without Change Events.
  • How to administer the invoicing process for your project's subcontractors. Define your billing periods and choose your project's desired method for creating and submitting subcontractor progress claims. See Owner Progress Claims & Subcontractor Progress Claims.
  • How to create and record payments. Once owner progress claims and subcontractor progress claims are approved and completed, you can create payments in Procore to keep a record of payments received. See Payments.

Cost Codes Setup

The first step when setting up Procore's Project Financials tools in a Procore project is to verify that your cost codes were set up by the person who created your new project.

Background

Procore default cost codes include a 16 Division cost code structure that aligns to the CSI MasterFormat® icon-external-link.png. See What are Procore's Default Cost Codes? However, some project owners may have requirements that lead you to create a unique cost code structure. When that is the case, you can import custom cost codes into either the Company level Admin tool. See Import Cost Codes to Procore.

Budget Setup

The Budget tool shows details about all estimated costs related to a project. The first step is to create your budget directly in Procore (or you can alternatively import an existing budget). Owners commonly use the budget as an internal tool for manaing project contracts and costs associated with various contractors. It is also used to track the estimated cost of completion—to show where you are under/over your budget across projects. However, for privacy reasons, budget information is typically hidden from external collaborators.

The Company level Admin tool lets you set up a budget view (see What are Procore's standard budget views?), which is a custom way of configuring and viewing your budget. Your custom budget view can include a wide variety of data columns, such as Original Budget Amount, Budget Modifications, Revised Budget, Pending Budget Changes, and more.

For more information about the Budget tool, see the Budget landing page.

Forecast to Complete

Procore's Project Financials tools send data to the Budget tool through the related budget codes assigned to each tool's line items. As a result, you'll be able to use Procore's Forecast to Complete feature to accurately forecast the estimated additional cost of each line item.

For more information about the Budget tool, see the Budget landing page.

Budget Modifications

The Budget Modification column allows you to reallocate funds on your budget to transfer money between Budget line items. 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 pull funds from the former budget code and add it to the latter as a contingency. Since budget modifications only appear on the Budget tool, external team members or vendors will not see your internal budget adjustments. However, it will give you a better method for strategically balancing budget line items throughout the course of construction to make sure you stay under budget.

For more information about the Budget tool, see the Budget landing page.

Advanced Forecasting

With Procore's Advanced Forecasting view, your company can spread budget values over future months to help project teams evaluate potential cost conditions by creating customised advanced forecasting views and assigning those views to project budgets. Important things to note include:

  • Your company's Procore Administrator can create customised forecasting templates using the system's default 'Procore Standard Forecast' view (see About the Procore Standard Forecast View) in the Company level Admin tool.
  • The steps for configuring columns and assigning the view to projects are similar to the steps used to create budget views—but specifically tailored for use with a new Forecasting tab which is available in the Budget tool. For instructions, see Set Up a New Forecasting View.

Direct Costs

Direct Costs are the costs your business incurs that are not associated with commitments (for example, reimbursable expense and overhead costs). The different types of direct costs that users can create in Procore are progress claims, expenses and payroll. Progress Claims are received from a vendor and are costs that are not tied to a commitment with that vendor. Expenses are used to track costs that are allocated from the company to the project, for things such as computers, phones, travel and so on. You can also track monthly payroll costs and classify them by cost code so that the payroll amounts reflect each month on the budget.

For more information about the Direct Costs tool, see the Direct Costs landing page.

Head Contracts Tool

Owners with an upstream budget approval requirement (or an internal head contractor) often find value using the Head Contract tool to set up upstream contracts and progress claims. After your budget is set up and visible in the project's Budget tool, you can create your project's head contract. This is where all of your receivable progress claims (also called, upstream billings) and head contract variations will be created and managed. If a project's budget and head contract are identical or if the head contract is a division-level summary of the budget, then the budget can be used to create the head contract. Often, the internal budget and the external head contract have different levels of detail, so the head contract is not just a division-level summary of the budget.

You can set up the head contract Program of Values (SOV) directly in Procore or you can import one. After setup is complete, your head contract must be approved before project users can create variations or owner progress claims. If Head Contracts are not desired, the Head Contract tool can be removed. See Add and Remove Project Tools.

For more information about the Head Contract tool, see the Head Contract landing page.

If the Head Contract tool is disabled, see the links below:

Commitments Tool

Once the head contract is approved (or if you chose to remove the tool from your project) you can set up your purchase orders and subcontracts.  

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 project owner) and issued to a 'seller' (for example, a head contractor,  subcontractor or specialty contractor) to cover the cost of a contract. Once accepted by the 'seller,' a purchase order represents an agreement between the two parties.

To learn more, see Create a Purchase Order.

For more information about the Commitments tool, see the Commitments landing page.

Contracts represent the contractual agreement between the Owner company and the contractors/vendors that will be performing a scope of work. Contracts are either created from a winning tender or are created manually from the Commitments tool. When you link a contract line item to a head contract line item, the connection will be reflected on head contract reports like the Buyout Report and the Job Cost to Budget Comparison Report (Note: this option is only available when not utilizing change events). When you select the related budget code for the contract or purchase order that it's associated with, the connection is automatically reflected on all budget reports (Budget Detail Report, Budget Summary Report, etc.) Commitment line items will appear on the budget just like commitment variations.

Change Management with Change Events

The Change Events tool is 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. You can configure your variation workflow by setting the number of variation tiers: one, two or three tiers. More variation tiers make for a more complex workflow but provide an increased amount of control.

For more information about the Change Events tool, see the Change Events landing page.

Change Management without Change Events

After you build out your commitment contracts, you can then create variations to account for additional costs. While most owners prefer to start out using the 2-tier variation tiers, the choice to configure it to use a 1-tier, 2-tier or 3-tier setting exists. More variation tiers make for a more complex workflow but provide an increased amount of control.

Head Contracts Enabled

  • What are the different variation tiers?
  • Create a PV to outline any potential change in costs that would affect the head contract. You can only enter a dollar amount at the PV level. When you fill out a schedule of values for a PV, you'll have the option to select a cost code. Ideally, it will be a cost code already in the budget. Within the Head Contract PV tool, you can see the budget increase on the Budget tab.
  • After creating a PV, you can create a CV that acts as a request for pricing from the contractor who will be responsible for the scope of work outlined in the PV. You can compare the CV to the corresponding PV and view your variance between the two.
  • After you've created Head PCOs, you can roll them into Variation Requests (VR). Variation Requests are typically the documents that are submitted for approval and can be used for submitting either individual Potential Variations (PCOs), or for grouping PCOs in order to streamline the review and approval process.
  • Once you have marked the CV as approved, the dollar change will be reflected in the "Committed Costs" column on the Budget tool. Commitments and potential CVs with a status of "Pending" will show up in the "Pending Cost Changes" column on the Budget tool.

Head Contracts Not Enabled

  •  You can only enter a dollar amount at the PV level. When you fill out a schedule of values for a PV, you'll have the option to select a cost code.
    • Create a Variation Request (VR) 
    • Variations with a status set to "Pending" will appear in the "Pending Budget Changes" column on the Budget tool. Approved HCVs can be added to head contract progress claims. Once you have marked the HCV as approved, the total dollar amount change will be reflected in the "Approved VARs" column on the Budget tool.
  • After creating a PV, you can create a CV that acts as a request for pricing from the contractor who will be responsible for the scope of work outlined in the PV. You can compare the CV to the corresponding PV and view your variance between the two.
  • Once you have marked the CV as approved, the dollar change will be reflected in the "Committed Costs" column on the Budget tool. Commitments and potential CVs with a status of "Pending" will show up in the "Pending Cost Changes" column on the Budget tool.

For more information about the Variations tool, see the Variations landing page.

Owner Progress Claims & Subcontractor Progress Claims

As the project progresses and the contracts have been created and approved, subcontractors can bill you for completed work by submitting 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.

For more information, see the Commitments landing page and the Head Contract landing page.

Payments

Once owner progress claims and subcontractor progress claims are approved and completed, you can create payments in Procore to keep a record of payments received. 

  • Track owner progress claims made on the Head Contract side:
  • Track progress claims made on the Commitments side. When you consistently update the "Payment Issued" tab, the "Paid To Date" column on your budget reports will automatically be updated to reflect those changes.

For more information, see the Commitments landing page and the Head Contract landing page.