Purchase Order

What is a purchase order?

A purchase order (PO) is a buyer's written authorization for a supplier to deliver specified materials, equipment, or services at agreed prices and terms. POs create a record that ties spending to a job before the invoice arrives.

On busy jobs, POs are how you stop "surprise" material bills from eating margin.

PO vs invoice

Accounts payable should match invoices to POs and delivery tickets before paying.

What belongs on a PO

• Job name and number for job costing
• Vendor name and contact
• Item description, quantity, unit price
• Delivery date and ship-to address
• Payment terms
• Tax and freight treatment

Vague PO lines make variance analysis useless.

PO workflow on construction jobs

1. Estimator or PM creates PO from approved estimate
2. Supplier confirms price and lead time
3. Materials delivered with packing slip
4. Invoice matched to PO and receipt
5. Cost hits job cost report

Skip matching and you will not know which job killed profit until months later.

PO vs subcontract

POs usually cover materials or simple supply. Subcontractors performing installed work typically get a subcontract with insurance, scope, and lien waiver terms, not a one-line PO.

On the job

Require PO numbers on all deliveries. Drivers leave tickets; office ties them to jobs.

Set approval limits. Field crews should not open unlimited vendor accounts.

Review open PO commitments weekly. Committed cost matters as much as billed cost.

Purchase orders are spending guardrails. Use them on every job big enough to hurt when material prices drift.