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Financial Tools User Guide

Overview

This guide provides an outline for successfully configuring and using all of Procore's financial tools. (e.g. Budget, Prime Contract, Commitments, Change Orders, etc.) You'll learn how to properly configure each financial tool as well as perform common financial tasks according to Procore's recommended best practices. Industry-specific and contextual notes are also included, which provide contextual insights and highlight important factors to take into consideration, as well as convey how the different tools and assets relate and link to one another to provide a complete and accurate financial record of all project related tasks.

Financial Tool Setup

Budget

The Budget tool provides visibility and details of all estimated costs related to a project. The first step is to create your budget directly in Procore or to import an existing budget (CSV). The budget is most commonly used as an internal tool to manage project contracts and costs associated with various subcontractors. However, for privacy reasons, budget related information is typically hidden from clients and subcontractors.

Prime Contract

After your budget is set up and visible in the project's Budget tool, you can create your project's Prime Contract. This is where all of your payment applications (i.e., owner billings) and prime contract change orders will be created and managed (Note: The Budget can be used to create the Prime Contract, if the two are identical, or if the Prime Contract is a division-level summary of the Budget). Often times, the internal Budget and the client-facing Prime Contract are different levels of detail, where the Prime Contract is not just a division level roll-up of the Budget. 

There are three ways to setup the Prime Contract tool:

After setup is complete, it must be approved before users can create change orders, payment applications, or issue payments in Procore. See Approve a Prime Contract.

Commitments 

Once the Prime Contract is approved, you can set up your commitments. There are two kinds of Commitments: Subcontracts and Purchase Orders

  • Subcontracts
    Subcontracts represent the contractual agreement between a General Contracting company and the subcontractors that will be performing the scope of work on site. Subcontracts are either created from a winning bid or are created manually from the Commitments tab. 
    • Award a Winning Bid and Convert It Into a Subcontract
    • Create a Subcontract
    • Note: When you link a subcontract line item back to a Prime Contract line item, the connection will be reflected on the following Prime Contract related reports: Buyout Report, Job Cost to Budget Comparison Report, etc.  When you select the related Cost Code for the Subcontract or Purchase Order that it's associated with, the connection is automatically reflected on all Budget related reports: Budget Detail Report, Budget Summary Report, etc. Commitment line items will appear on the budget just like commitment change orders.
       
  • Purchase Orders
    Purchase orders are legal offers between you and vendors for the purchase of goods and/or services.

Change Orders with Change Events

Change Events are created for anything on the project that looks like it may create an additional cost. The goal of Change Events is to track any change that could potentially create a cost.

Change Orders without Change Events

After you have built out your contracts, you can create change orders to account for additional costs. Most change orders start with a Potential Change Order (PCO).

  • Create a Potential Change Order (PCO)
    • Create a PCO to outline any potential change in costs that would affect the Prime Contract.
      • Note: You can only enter a dollar amount at the PCO level. When you fill out a Schedule of Values for a PCO, you'll have the option to select a cost code. Ideally, it will be a cost code already in the budget, so you can see the budget increase on the Budget tab.    
  • Create a CCO From a PCO
    • After creating a PCO, you can create a CCO that acts as a request for pricing from the subcontractor who will be responsible for the scope of work outlined in the PCO. You can compare the CCO to the corresponding PCO and view your variance between the PCO and CCO. 
  • Create a Change Order Request (COR)
    • After you've created PCOs, you can roll them into Change Order Requests (COR). Change Order Requests are typically the document(s) that are submitted for approval, and can be used for submitting either individual Potential Change Order (PCOs), or for grouping PCOs in order to streamline the review and approval process. 
  • Create a Prime Contract Change Order (PCCO)
    • Note: Once you have marked the PCCO as approved, the total dollar amount change will be reflected in the "Approved COs" column on the Budget tab.  
    • Change orders with a status set to "Pending" will appear in the "Pending Budget Changes" column on the Budget tab.
    • Approved PCCOs can be added to payment applications. 
  • Create a Commitment Change Order (CCO)
    • A commitment change order outlines variations in costs that affects the contract between the General Contracting company and a vendor or subcontractor.
    • Once you have marked the CCO as approved, the dollar change will be reflected in the "Committed Costs" column on the Budget tab.
    • Commitments and potential CCOs with a status of "Pending" will show up in the "Pending Cost Changes" column on the Budget tab.

Payment Applications & Requisitions

As the project progresses, and the contracts have been created and approved, subcontractors can bill you for completed work via requisitions and you can create payment applications to the owner, which can then be emailed to the party that is being requested for payment.

​​​​​​​Payments

Once payment applications and requisitions are complete, you can create payments in Procore to keep a record of payments received. 

  • Create a Payment (Tracks payment applications made on the Prime Contract side.)
  • Add Payments Issued (Tracks draw requests made on the Commitments side.)
    Note: 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.

​​​​​​​Forecast to Complete

All items mentioned above will roll into the Budget tab because they are connected via cost codes and their line item types. As a result, you'll be able to use the "Forecast to Complete" feature to accurately forecast the current estimated additional cost of each line item.

​​​​​​​Budget Modification

The Budget Modification column will allow you to re-allocate funds on your budget to transfer money between cost codes. For example, if you have a cost savings related to one cost code because it came in under budget but expect another cost code to come in over budget, you can pull funds from the former cost code and add it to the latter as a contingency. Since budget modifications only show up on the Budget tab, vendors will not see your internal cost adjustments. However, it will give you a better method for strategically balancing incremental profits and losses throughout the course of construction to make sure you stay under budget.

 

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