The Must Haves on a Construction Purchase Order
What is a construction purchase order?
Purchase orders are messages sent from buyers to sellers with a request for an order for a product. In other words, they are contracts binding the buyer and the seller through the product being sold. A purchase order should include descriptions, quantities, discounts, and prices of the product. Ideally, they should also state payment terms and shipment dates. Purchase orders are important in the construction industry because they are contracts that list the agreement between the buyer and the seller.
When a seller accepts a purchase order, a legally bound contract is formed between the two parties. It is important that the buyer makes specific request clear, and that the seller includes specific product information so that confusion is avoided in the agreement.
What exactly should a construction purchase order list?
– A description of the product
– Quantity of the product
– Price and/or discount on the product
– Payment terms
– Shipment dates
– Identification of seller
– Other terms and conditions
Why are purchase orders important?
Purchase orders are important to contractors because they serve as concrete, legal expectations for the buyer and instructions for the seller. If a deal goes wrong, it is important to be able to easily find and address the purchase order so that both parties can determine where the request went wrong and whose is at fault.
Contractors should emphasize the organization of their purchase orders so that they have jurisdiction in case a deal goes wrong. They should also remember to use purchase orders for every single purchase and supplier, even for those that they have long relationships with, so that they can finish their projects on time and within budget.
Common problems with purchase orders in the construction industry today:
Often contractors have problems with storing their purchase orders. Many contractors today still use the old school legacy system of keeping the record, which is not associated with any other function of the business, besides maybe accounting. Since many contractors remain constrained with siloed data, they do not have a centralized location to store business information, and communication between the various departments is frequently disjointed.
In addition to the problem listed above, these companies do much of their information processing manually which takes longer and leaves room for human error. After observing the complications of many subcontractors, eSUB realized that change in the current system was needed.
Why use the eSUB construction software for managing POs?
eSUB provides contractors with a better, more refined system for managing and tracking purchase orders. The software allows buyers to create purchase orders and track material costs by labor activity. It also allows the office to track the progress of the project in detail by instantly communicating when products are delivered. eSUB software has made it possible for many contractors to increase sales volume with less office staff by comparing actual and estimated costs for purchase orders and updating dates of material delivery. With eSUB in place, the elimination of paper documents has driven down the need for manual labor in the office which in turn lowers chance of error and increases overall efficiency.
When using eSUB software, there has also been greater collaboration between different departments of companies. Having a centralized location to store information allows various departments within the office to share information with ease instantly. Clearer communication is also seen among members of the office and the field. Office employees can complete purchase order tracking, receive faster approval, control access permissions, and access real-time payment status which eliminates confusion and allows for greater efficiency in both the office and the field.
Purchase orders will continue to play a critical role in the relationship between buyers and sellers of construction products and services. They will do this by holding buyers and sellers accountable for their established agreement. Because of this, it is important that subcontractors know what a purchase order must have. Subcontractors should remember that their purchase orders should be clear and address all of the things listed above, and should be stored in an organized and easily accessible place. By following the guide above, subcontractors can boost both efficiency and profits by creating better purchase orders which can be more easily handled.