General Inquiries

Purchase Orders

  • 1.  Purchase Orders

    Posted 26 days ago
    Good morning,

    As I am consulting at an excavation contractor I'm finding challenges in the accumulation of job costs. They are not currently using Purchase Orders.

    In preparing the WIP, several projects are showing very high Billings in Excess of Costs. I am told they do not front-load their billings.

    As I inquire it appears that many of the vendors (materials, subcontractors, etc.) are very tardy in submitting their bills. Hence, my incurred costs are understated which explains the reason for the high BIE #.

    Do any of you encounter a similar challenge and what do you do to overcome it?

    Regards,


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    Stuart Guber BS- Accounting
    Stuart H. Guber, CPA
    Springfield NJ
    (973) 255-8249
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  • 2.  RE: Purchase Orders

    Posted 26 days ago
    Stuart,

    I generally have accrued any significant expenses that haven't been posted yet, this could include invoices received but not yet approved as well. I would debit job cost for the expense and credit an Accrued Job Payable account. This allows the expense to be recognized in the month incurred and reflected properly on the WIP report.

    Best,

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    Kevin Halme CCIFP
    Constructive Tech Solutions
    Omaha, NE
    www.consttech.solutions
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  • 3.  RE: Purchase Orders

    Posted 26 days ago
    Kevin,

    Thanks for getting back to me.

    I'm not sure if you addressed my concern...that being we've incurred the costs but have no invoice nor PO to accrue by.

    The PM's, when billing, obviously estimate the man days, materials and sub costs resulting in the much higher billing to date vs. the revenues earned based on the understated costs.

    Would you concur that implementing PO's would/should mitigate this issue?

    Regards,

    ------------------------------
    Stuart Guber BS- Accounting
    Stuart H. Guber, CPA
    Springfield NJ
    (973) 255-8249
    ------------------------------



  • 4.  RE: Purchase Orders

    Posted 26 days ago
    Stuart,

    PO's may help with materials depending on the process used. If a PO is used and received materials are recorded that would allow you to determine the cost of materials received. However, without a PO the PM could probably tell you the percentage of the materials received and the dollar amount of the materials ordered from a vendor based on the quoted dollar amount. With a quote and a packing slip you can do the same math as if a PO was issued. Many contractors use PO's loosely and can't determine the value of materials received.

    It's my opinion (as an non-CPA) that a reasonable estimate of the cost incurred is more accurate than waiting to recognize the cost in a later period due to lack of exact information.

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    Kevin Halme CCIFP
    Constructive Tech Solutions
    Omaha, NE
    www.consttech.solutions
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  • 5.  RE: Purchase Orders

    Posted 25 days ago
    ​In our ERP System (Vista) we have our jobsites electronically scan and enter receipts on a daily basis against Purchase Orders. There is a setting in Vista that allows posting of expenses immediately when receipts are entered against PO lines. Thus, you have real time cost and don't have to depend on invoices. If the invoice comes in later after the month is closed if there is a small difference (freight, etc.) the additional small cost is posted to the current open month. If most receipts are entered against POs that have been setup properly there are no adjustments.

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    Paul West
    Director of Enterprise Applications
    The Middlesex Companies
    Orlando FL
    (407) 206-0077
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  • 6.  RE: Purchase Orders

    Posted 24 days ago
    Hi Stuart,

    I agree with Paul.  While the use of PO's is better than not using POs, the material aspect of PM estimates will be mitigated if you use PO Receipt functionality.  A PO alone would be a starting point for a project manager to fashion an estimate but I would counter that the same exercise could be done reviewing the Phase Code / Cost Types original/current estimate.  Receipts, recorded quickly and diligently, remove the guesswork.

    Respectfully,


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    Timothy McNally
    Principal Consultant
    Tilson Technology Management
    Annapolis MD
    1-720-739-2322 - office
    970-391-1475 - cell
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