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Procore

Financial Tools User Guide

Overview

This guide provides an outline for successfully configuring and using all of Procore's financial tools. 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.

Note: If you have integrated Procore with Sage 300 CRE®, refer to the Sage 300 CRE Connector: Financial Tools Guide.

Financial Tool Setup

Budget
Prime Contract
Commitments
Change Orders with Change Events
Change Orders Without Change Events
Owner Invoices & Subcontractor Invoices
Payments
Direct Costs
Forecast to Complete
Budget Modification

Budget

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 to import an existing budget. 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 information is typically hidden from clients and subcontractors.

The company-level Admin tool lets you set up a budget view, 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.

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 owner invoices (i.e. owner billings) and prime contract change orders will be created and managed. If a project's budget and prime contract are identical, or if the prime contract is a division-level summary of the budget, then the budget can be used to create the prime contract. Often, the internal budget and the client-facing prime contract have different levels of detail, so the prime contract is not just a division-level summary of the budget.

You can set up the prime contract directly in Procore, or you can import one. After setup is complete, the prime contract must be approved before users can create change orders, owner invoices, or issue payments in Procore. 

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

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 tool. When you link a subcontract line item to a prime contract line item, the connection will be reflected on prime contract reports like the Buyout Report and the Job Cost to Budget Comparison Report. 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 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 or services.

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

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.

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

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 PCO to outline any potential change in costs that would affect the prime contract. 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.
  • 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 two.
  • After you've created PCOs, you can roll them into Change Order Requests (COR). Change Order Requests are typically the documents that are submitted for approval, and can be used for submitting either individual Potential Change Orders (PCOs), or for grouping PCOs in order to streamline the review and approval process.
  • Change orders with a status set to "Pending" will appear in the "Pending Budget Changes" column on the Budget tool. Approved PCCOs can be added to owner invoices. Once you have marked the PCCO as approved, the total dollar amount change will be reflected in the "Approved COs" column on the Budget tool.
  • 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 CCO as approved, the dollar change will be reflected in the "Committed Costs" column on the Budget tool. Commitments and potential CCOs with a status of "Pending" will show up in the "Pending Cost Changes" column on the Budget tool.

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

Owner Invoices & Subcontractor Invoices

As the 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.

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

Payments

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

  • Track owner invoices made on the Prime Contract side:
  • Track draw requests 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 Prime Contract landing page.

Direct Costs

Direct Costs are the costs your business incurs that are not associated with commitments; for example, general conditions and self-performed work. The different types of direct costs that users can create in Procore are invoices, expenses, and payroll. Invoices 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, internal equipment rentals, etc. 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.

Forecast to Complete

The other financial tools discussed in this guide send data to the Budget tool 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 estimated additional cost of each line item.

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

Budget Modification

The Budget Modification column allows 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 appear on the Budget tool, 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.

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

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