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Align Clients and Contractors with Project Procurement
By Jose Barato
February 9, 2025
3 minutes read
When a client outsources part of their project to a contractor, they need to manage their payments. Similarly, when a contractor executes a project for a client, they must manage their invoices. In projects, we can consider payments and invoices representing two perspectives on the same information: deliverable, due date, amount, currency, purchase order, description, etc. Disconnected management of payments and invoices often leads to misunderstandings that are resolved too late, causing project delays and, frequently, contract breaches.
With PMPeople, the client’s project manager can link the outsourced work package to the contractor’s project. If both parties manage their payments and invoices collaboratively and proactively, they can avoid many common issues and misunderstandings.
Unified Management of Payments and Invoices
In unified management, payments and invoices can go through different states, from planning to paid. The payment-invoice object can transition through ten states:
- Payment Planned
- Invoice Planned
- Invoice Proposed
- Proposal Approved
- Proposal Rejected
- Payment Requested
- Payment Approved
- Payment Rejected
- Payment in Process
- Paid
Certain state transitions, such as moving from “Invoice Proposed” to “Proposal Approved,” can only be performed by the client. Other transitions, such as from “Proposal Approved” to “Payment Requested,” can only be carried out by the contractor.
Four Use Cases
In PMPeople, clients can connect outsourced work packages to contractor projects in the section Procurement > Connect Contractor. On the other hand, contractors can plan and control their invoices in the sections Plan Finance and Control Finance, respectively.
PMPeople can be used under 4 cases for managing payments and invoices:
- Client-only Payment Management: The client manages their payments unilaterally without linking the contract to the contractor’s project. Payments can only have two states: “Payment Planned” and “Payment in Process.”
- Disconnected Mode: The client does not link the subcontracted package to the contractor’s project. The client manages payments, and the contractor manages invoices independently, without linking payments and invoices.
- One-Way Connection: The client links the subcontracted package to the contractor’s project, allowing the client to manage payments while also viewing how the contractor manages invoices. However, the contractor cannot see how the client handles payments. The contractor can check if their invoice information has been reviewed when the client marks it as “read.”
- Two-Way Connection: The client links the subcontracted package to the contractor’s project and shares their payment management with the contractor. Both parties manage their respective aspects (payments and invoices) while also being able to see how the other party manages theirs. Both can check if their information has been reviewed by the other party. Most importantly, this mode helps prevent most common misunderstandings.
By ensuring clear communication and linking payment and invoice management, both parties can minimize disputes and delays, leading to smoother project execution and better contract compliance.