A purchase order (PO) is the buyer’s written authorization to a supplier: what to deliver, how much, at what price, to which job and cost code. Once issued, it becomes a commitment against the job budget. In construction, POs typically cover materials, rentals and smaller service scopes; scopes with labor on site usually go under a subcontract instead.
Why it matters
A PO sets the price before the invoice arrives. That gives accounting something to match the invoice against, gives the PM visibility into committed cost and protects the job from surprise pricing. Without POs, AP is approving invoices on trust.
Worked example
On Riverside Medical Center, PO-118 has $42,050 of commitment remaining. INV-4471 comes in at $48,200, which is $6,150 over. Because the PO exists, the overage is flagged at entry. The PM confirms whether the extra quantity or price was approved; if it was, the PO is revised first, then the invoice is paid. If not, the vendor issues a credit. (Illustrative sample data.)
Common mistakes
- Blanket POs with no quantities or unit prices, which can’t be matched to anything.
- Creating the PO after the invoice (“after-the-fact POs”) just to satisfy a process.
- Coding the PO to the wrong cost code, so the job total looks right but the detail is wrong.
How os.construction handles it
We’re building POs as live commitments tied to the job budget, field receipts and AP, so the match runs automatically and exceptions go to a person to approve.