Table of Contents
Financial Management User Guide
For General Contractors
This user guide provides general 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 customize 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 compartmentalize 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, organization, 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, analyze 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 customizable 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.
- Utilize Data Collected in the Field to Track Labor 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 Labor Costing and Set Up the Procore Labor 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.
Prime Contracts Tool
After setting up the Budget tool, you can begin creating one or multiple prime contracts for your project. With the Prime Contracts tool, your team can replace stacks of paper and expensive printer costs with a central location for digital contract management.
- Set Up Your Prime Contracts. While most Procore customers create a single prime contract for a single construction project, project teams do have the option to create multiple prime contracts in the Prime Contracts tool. For details, see Create Prime Contacts. Similar to budget, you can also choose from two methods for setting up your prime contract: (1) You can manually Update the Schedule of Values on a Prime Contract or (2) you can Import a Prime Contract SOV from a CSV File. When finished with the initial setup, simply approve it. See Approve a Prime Contract.
TipDoes your construction project have multiple funding sources or delivery methods? Learn why some Procore clients decide to create multiple prime 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 prime contracts?
- Create and Manage Owner Invoices. After your prime contract is set and you've set up the Commitments tool as described below, you can also create and manage your owner invoices. An owner invoice 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 general contractor and submitted to a project owner to signal that a payment is due for completed work. See Create an Owner Invoice.
- 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 Prime Contract.
To learn what else you can do with the Prime Contracts tool, see Prime Contracts.
After your contract(s) are approved and completed in the Prime 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 change order 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 retainage 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 general 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 Invoices and Manage Invoice Contacts. Using the Commitments or Invoicing tool, you can also Create an Invoice on Behalf of an Invoice Contact or you can provide your subcontractor's invoice contacts with the appropriate permissions to access their purchase orders and subcontracts. See Add Invoice Contacts to a Purchase Order or Subcontract. Users with 'Admin' permission on the Commitments tool can also use those permissions to manage invoices 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 Change Orders and Change Events tools or, (2) Enable only the Change Orders tool.
Change Orders 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, change orders can then be created based upon the submitted quote.
- Configure Your Change Order Tier Settings. You can choose between a one (1)-, two (2)-, and three (3)-tier change order 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 change order tier settings in Project Financials? Once you've decided, you can Configure the Number of Prime Contract Change Order Tiers and Configure the Number of Commitment Change Order 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 change order. See Review RFQ Responses.
- Create Change Orders. You can create two types of changes orders in Procore:
- A Commitment Change Order can be created before or after an RFQ response is submitted. See Create a Commitment Change Order from a Change Event.
- A Prime Potential Change Order can be created before or after an RFQ response is submitted. See Create a Prime Potential Change Order From a Change Event.
To learn what else you can do with the Change Events tool, see Change Events.
Change Orders without Change Events
If your team decides not to enable the Change Events tool, you can still use the Change Orders tool to account for additional costs. For most Procore customers, this change management workflow starts off by creating a Potential Change Order.
- Create a Potential Change Order. Use a potential change order to manage any additional costs affecting the prime contract. When creating a potential change order, you can only enter a dollar amount. Later, when you update the Schedule of Values (SOV) for the potential change order, you'll have the option to select a budget code. Ideally, the potential change order 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 Change Order for a Prime Contract.
- Create a Commitment Change Order. After the potential change order is created, you move on to create a commitment change order. The commitment change order 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 change order. You can compare the commitment change order to the corresponding potential change order and view your variance between the two. To learn more, see Create a Commitment Change Order from a Prime Contract Change Order.
- Create a Change Order Request. After you've created potential change orders, you can package one or multiple potential change orders into change order requests. Change order requests are typically the documents that are submitted for approval, and can be used for submitting either individual potential change orders, or for grouping potential change orders in order to streamline the review and approval process. See Create a Change Order Request (COR).
- Create a Prime Contract Change Order. Next, you can begin creating change orders. Note that when you set a change order's status set to Pending, it appears in the 'Pending Budget Changes' column of the Budget tool. After the prime contract change order is set to Approved, the total dollar amount change is reflected in the 'Approved COs' column of the Budget tool. Approved change orders can be added to owner invoices. For details, see Create a Prime Contract Change Order.
- Create a Commitment Change Order. A commitment change order outlines variations in costs that affect the contract between the general contracting company and a vendor or subcontractor. Once you have marked the commitment change order as approved, the dollar change will be reflected in the "Committed Costs" column on the Budget tool. Commitments and potential commitment change orders with a status of "Pending" will show up in the "Pending Cost Changes" column on the Budget tool. See Create a Commitment Change Order.
To learn what else you can do with the Change Orders tool, see Change Orders
Procore's Invoicing tool uses the user permission granted in the Commitments and Prime Contracts tool. As your project progresses and the contracts have been created and approved, subcontractors can bill you for completed work via subcontractor invoices. You can also create owner invoices, 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 invoice's due date, and the billing period's end date. To learn how to create a billing period with the Invoicing tool, see Manage Billing Periods.
- Create and Manage Subcontractor Invoices. With the Invoicing tool, you can keep user permissions restricted to your project team and Create an Invoice on Behalf of an Invoice Contact or you can provide your subcontractor's invoice contacts with the appropriate permissions to access their purchase orders and subcontracts. See Add Invoice 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 an Invoice Contact and your subcontractors can then Submit a New Invoice as an Invoice Contact. You can then review and approve these invoices.
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:
- Invoices. Create a direct cost for a paper invoice 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