General Inquiries

Purchase Orders

  • 1.  Purchase Orders

    Posted 12-07-2018 14:47
    ​I have worked for 3 different Construction Companies, and none of them use purchase orders to manage their procurement process.  Whenever the discussion of purchase orders would come up, the general consensus was that it was impractical or undesirable to use.

    In my current role, the President has suggested that he would like for me to implement a purchase order process for our company.  One thing I have been considering is implementing an electronic tracking and approval process for AP invoices in order to streamline our AP process.

    I am curious what others are doing.  Do you utilize a purchase order process, and whether you do or do not, I am curious as to what your rationale is.  We currently use an ERP system that has a PO and Inventory module.  We also do not utilize a formal inventory system.

    Thanks,

    ------------------------------
    Darin Jennings CMA
    Chief Financial Officer
    Blue Nile Contractors
    Kansas City MO
    (816) 505-1302
    ------------------------------


  • 2.  RE: Purchase Orders

    Posted 12-07-2018 15:48
    Darin,

    Here are my thoughts, hopefully other members will comment with their thoughts/experience as well.

    Many contractors use purchase orders for materials that are ordered at the start of a project. This can be done at relatively low cost and provides a good basis for AP invoice verification and approval. Having a written purchase order also allows the terms (such as required submittal or delivery dates) to be in writing which is often critical for risk management. At a former employer, we had projects with hundreds of pipe items on a purchase order, by having the purchase order in the ERP we could verify pricing as the AP invoice was entered and note any discrepancies that needed to be resolved.

    Some contractors have a full or partial Purchase Order systems requiring PO's for all purchases or all purchases over a threshold amount. This comes at a much higher cost (direct and soft). An example would be if a crew needed some additional materials to complete a task, they would need a PO before being able to buy what they need at the local hardware store. Sometimes the overhead cost of this process can be higher than the cost of the materials. So, I'd recommend a threshold if you are looking at this type of process. The benefit of this type of process is that you know your committed cost before it is spent and if there is budget remaining. Some contractors use it to try to control spending, but unless your vendors have knowledge of the limits of the purchase order it is won't restrict an employee from spending over the PO amount. I think that the full PO process can be more disruptive to the productivity of the workforce, which can result in considerable soft cost. You could consider an alternate process of immediate reporting of the expense for small purchases, such as emailing a copy of the receipt to ap@yourcompany.com. If your AP department is efficient (which they should be), this could result in better information on small purchases rather than a PO process with very little delay. Both processes require enforcement to get a high level of field compliance. Keep in mind, small purchases are usually a drain on the budget and productivity, ideally required materials are procured well in advance, so some field managers may need look ahead training to help determine what they need to get the job done. If you have time to order the materials, the overall cost of a PO process will decrease substantially.

    Electronic routing and approval of the invoices can be very beneficial, some systems allow review and approval of invoices from the field. Here is a discussion thread regarding electronic AP in Vista.

    Best,

    Kevin Halme
    Constructive Tech Solutions
    Omaha, NE
    www.consttech.solutions







  • 3.  RE: Purchase Orders

    Posted 12-08-2018 10:25

    We have a materials/inventory manager who orders all of our materials for jobs and inventory, and of course uses PO's.  That said, we still route the material invoices to him for approval.  All other invoices are routed to the person who initiated the purchase for approval.  So we only use PO's for our material purchases.  Routing is pretty hassle free, by way of all of our invoices coming into an AP e-mail address, auto-forwards, etc.

     

     

    Robert McManus

    Chief Financial Officer

    Direct: 404.965.9349 

    Main: 404.361.5154 | Fax: 404.965.9355

    PO Box 45717 | Atlanta, GA 30320

    www.msrs.com

                

     

     

     

     






  • 4.  RE: Purchase Orders

    Posted 12-08-2018 10:38
    Does your inventory manager have access to just the part of the accounting software that would allow that manager to create a PO there. That could streamline. 

    Cheers,

    Brenda Keomany

    President

    503-347-6263

    brenda@statusaccounting.com

     "STATus" = Setup, Training, Accounting, Troubleshooting; plus "us", as in working together.                http://www.statusaccounting.com

    https://www.tsheets.com/#a:statusaccounting

    https://www.rightnetworks.com/status-accounting/

    https://zoom.us/j/5455237778 

    https://proadvisor.intuit.com/app/accountant/search?searchId=brenda-keomany

     Need to schedule a Meeting? A 60 min virtual meeting or meeting in my office can be scheduled by clicking this link to my calendar.  calendly.com/brenda-keomany note: meetings at your office need to be set-up via email or phone. https://calendly.com/brenda-keomany/meeting








  • 5.  RE: Purchase Orders

    Posted 12-08-2018 07:50
    Purchase orders can help you to quickly know if you are paying the right amount and if the purchase was authorized. Or you can do it the old fashioned way and go find the contract amount and all the change orders add those up and add any prior payments verify you are not overpaid and then pay. 

    It changes the current workflow that is the challenge, if you can find a benefit to the resistors then it will be an easier sell. 

    In QuickBooks and any software you are working with it all starts with the item list and streamlining that and the budget lines that people can purchase against and then getting that information back from vendors in the same format. We are currently beginning to work with Procore to help that process ( we are not far enough into the process to share the pros and cons- so far I really see the potential) I recommend you start by making sure that the budget the project manager uses will work with the items you are going to record on your purchase orders and bills in your current system. 
    It only takes one avoiding overpayment to make the implementation of purchase orders a return on investment, 

    Cheers,

    Brenda Keomany

    President

    503-347-6263

    brenda@statusaccounting.com

     "STATus" = Setup, Training, Accounting, Troubleshooting; plus "us", as in working together.                http://www.statusaccounting.com

    https://www.tsheets.com/#a:statusaccounting

    https://www.rightnetworks.com/status-accounting/

    https://zoom.us/j/5455237778 

    https://proadvisor.intuit.com/app/accountant/search?searchId=brenda-keomany

     Need to schedule a Meeting? A 60 min virtual meeting or meeting in my office can be scheduled by clicking this link to my calendar.  calendly.com/brenda-keomany note: meetings at your office need to be set-up via email or phone. https://calendly.com/brenda-keomany/meeting