How to write better purchase orders (and why it's important)

Why Every Contractor Needs To Bulletproof Their Purchase Orders

Effective cost management is paramount to the success of any construction project. As building materials account for a significant chunk of the budget, inefficiently handled material orders can greatly affect contractors' profit margins. By carefully planning and coordinating the procurement of materials, construction teams can streamline the process, avoid shortages, and maintain control over project timelines and finances. In order to effectively support the buyer's timeline and budget, the details on the purchase order should convey crucial information. Here are our expert tips to guarantee smooth and successful material orders:

When it comes to the procurement process, there are various systems that can be utilized, ranging from traditional paper-based methods to more modern and efficient digital solutions. From the conventional practice of creating purchase orders on paper to the convenience of sending them via email, there are several options to consider. While using Excel spreadsheets to generate and track purchase orders offers a level of organization and customization, converting them to PDF format can ensure consistency and ease of sharing among team members. However, the most advanced and streamlined approach is to leverage specialized purchase order software, which not only automates the process but also provides features for monitoring, tracking, and analyzing procurement data. Each system has its own set of advantages and considerations, so choosing the right one depends on the specific needs and requirements of each individual contractor.

The Importance of Project Details

When creating a purchase order for a construction project, it is essential to include detailed project information and contact information for the people placing and receiving the order onsite. This helps in establishing clear communication channels and ensures that any queries or issues can be addressed promptly. Additionally, incorporating relevant logistics details, such as delivery instructions and timelines, plays a crucial role in facilitating smooth and efficient delivery of materials to the construction site. Project-centric POs will also make it easier to asses budget and goals throughout the project.  Purchasing software can automate this type of information that is prebaked in the project setup.

More Than Just Quantities

Clearly outlining the required materials and quantities is essential, but some additional information may be beneficial as well. Including vendor's item codes and using relevant units of measurement will prevent delays caused by the need for clarifications. You should have space to make additional specifications, such as color or manufacturer preference. When utilizing PO software that seamlessly integrates with your project materials, all pertinent details will automatically populate, streamlining your workflow and enhancing efficiency. Comprehensive purchase order details aid in effective budgeting and resource allocation, enabling improved price analysis for future projects.

What Are The Terms 

Ensure that all relevant purchasing and delivery information is prominently displayed on the purchase order. Including details such as the target date, delivery method and payment terms not only helps the supplier meet your needs but also sets clear expectations. Whether you are shipping to a jobsite, warehouse, or multiple facilities, it is essential that the order accurately reflects these requests. Utilizing software that can accommodate various shipping locations simplifies the selection process, eliminating the need to input addresses for each order.

No Blank Checks

Ensure that your purchase order includes both the unit and total price and any applicable taxes or fees. You can even attach the quote to the PO for reference. If you are obtaining quotes during the bidding phase, then your POs should reflect that price, ensuring that the invoice will match.  The right software will associate quoted pricing with each project PO without having to cross references various spreadsheets and PDFs line by line.  Avoid ordering blindly and subjecting yourself to price fluctuations; always do your due diligence to gather multiple quotes. Utilizing procurement software can help manage quotes and maintain accurate vendor pricing for informed decision-making. Consistency is key to avoid surprises when invoiced. 

Consider Improving Vendor Management

Regardless of whether you consistently order from a select few suppliers or have a wide-ranging list to manage, having a streamlined system in place to store vendor contacts and their product catalog can prove invaluable. This not only facilitates automatic population of purchase orders and efficient email distribution but also enables seamless generation of reports categorized by vendor across all your projects. Your team will find it highly beneficial to have all information centralized and accessible to everyone, eliminating the need for individual record-keeping and file management..

Prioritize Efficiency

Ensuring the efficiency and accuracy of your material order process is a crucial aspect of running a successful construction operation. Whether you are a small contractor working on residential projects or a large company handling multiple commercial ventures, the importance of streamlined procurement cannot be overstated. By implementing best practices in purchase order management, you can avoid costly delays, prevent budget overruns, and maintain strong relationships with your suppliers. Remember, the devil is in the details, so take the time to fine-tune your process and reap the benefits of a well-oiled procurement system.