Require POs before scheduling—with admin bypass when needed.
# Purchase Orders that Actually Get You Paid
Purchase orders are supposed to be the foundation of getting paid in construction. They provide authorization, establish pricing, and create a paper trail for invoicing. But in reality, PO management is often chaotic, inconsistent, and a major source of payment delays.
The problem isn't the concept—it's the execution. Most contractors handle POs reactively, creating them after work is done or trying to retroactively justify costs. This approach leads to disputes, delays, and unpaid invoices.
## Why PO Discipline Matters in New-Home Construction
In new-home construction, PO discipline is critical for several reasons:
**Cash Flow Management**: Builders need to control costs and manage cash flow. POs provide the authorization and budget control they need to make informed decisions.
**Change Order Tracking**: When specifications change, POs provide the baseline for measuring additional costs and scope changes.
**Quality Control**: POs establish the work scope and quality standards upfront, reducing disputes about what was supposed to be done.
**Payment Processing**: POs create the authorization needed for accounts payable to process invoices quickly and accurately.
**Audit Compliance**: Many builders have internal audit requirements that mandate PO authorization for all work.
## The "PO Required" Enforcement Model
The most effective PO systems require authorization before work can be scheduled. This prevents unauthorized work and ensures that all costs are approved upfront.
### Pre-Scheduling Validation
Before any work can be scheduled, the system should check for:
- Valid PO number and authorization
- Approved work scope and specifications
- Budget availability and approval limits
- Contractor capacity and availability
### Automatic Workflow Routing
When work is requested, the system should automatically route it through the appropriate approval process:
- Routine work under established limits: automatic approval
- Standard work within budget: supervisor approval
- Complex or expensive work: manager approval
- Emergency work: expedited approval with post-work documentation
### Real-Time Budget Tracking
The system should track PO commitments against available budgets in real-time. This prevents overspending and ensures that work can be authorized when needed.
## Admin Bypass for Emergencies
While PO discipline is important, emergencies happen. The system must support admin bypass for urgent situations while maintaining proper documentation and approval.
### Emergency Authorization
For true emergencies (safety issues, water leaks, security problems), the system should allow:
- Immediate work authorization with admin override
- Automatic notification to all relevant parties
- Post-work documentation and approval
- Escalation to appropriate management levels
### Documentation Requirements
Emergency work should require:
- Clear description of the emergency situation
- Photos or other evidence of the problem
- Cost estimate and justification
- Post-work approval and documentation
### Audit Trail
All emergency work should be tracked with:
- Who authorized the work and when
- Why the emergency bypass was necessary
- What work was performed and at what cost
- How the situation was resolved
## Connecting POs to Tickets and Closeout
POs shouldn't exist in isolation. They should be connected to work tickets, progress tracking, and closeout processes to create a seamless workflow.
### Ticket Creation and Management
When work is authorized, the system should automatically create work tickets with:
- PO reference and authorization details
- Work scope and specifications
- Quality standards and acceptance criteria
- Timeline and completion requirements
### Progress Tracking
As work progresses, the system should track:
- Work status and completion percentage
- Time and materials used
- Quality control checkpoints
- Issues and change requests
### Closeout Integration
When work is completed, the system should:
- Verify completion against original specifications
- Document any changes or additional work
- Prepare final invoices with PO references
- Update budget tracking and financial records
## Invoice Processing and Payment
The connection between POs and invoicing is critical for getting paid quickly and accurately.
### Automatic Invoice Generation
Completed work should automatically generate invoices with:
- PO reference and authorization details
- Work performed and materials used
- Time and labor costs
- Change orders and additional work
### Approval Workflows
Before invoices are sent, they should go through approval processes that include:
- Work completion verification
- Cost validation against PO amounts
- Quality control review
- Builder authorization confirmation
### Payment Tracking
Once invoices are approved, the system should track payment status and follow up on overdue accounts.
## Key Performance Indicators
Track these metrics to measure PO system success:
**PO Coverage**: What percentage of work is covered by valid POs? Aim for 95% or higher.
**Approval Time**: How long does it take to get PO approval for different types of work? Track by work category and approval level.
**Payment Speed**: How quickly do PO-authorized invoices get paid compared to non-PO invoices?
**Dispute Rate**: What percentage of PO-authorized work results in payment disputes? This should be significantly lower than non-PO work.
## Implementation Best Practices
Start with a pilot program using a small group of projects and contractors. Get the process working smoothly before expanding to your entire operation.
### Standardize PO Categories
Create standard PO categories for different types of work:
- Routine maintenance and repairs
- Standard construction work
- Complex or specialized work
- Emergency and urgent work
### Establish Approval Limits
Define clear approval limits for different levels of management:
- Field supervisors: $500
- Project managers: $2,500
- Division managers: $10,000
- Senior management: $25,000+
### Train Your Team
Make sure everyone understands the PO process and their role in it. Provide training on the software and the business rules.
## Common Pitfalls to Avoid
**Over-Complicating the Process**: Keep your PO system simple and focused on the essentials. Don't try to solve every possible problem with complex workflows.
**Poor Data Quality**: Garbage in, garbage out. Make sure your initial data is accurate and that everyone understands how to maintain it.
**Lack of Integration**: Don't let your PO system become another silo. Integrate it with your other business systems for maximum efficiency.
**Inflexible Rules**: While discipline is important, the system must be flexible enough to handle real-world situations and emergencies.
## Technology Requirements
Effective PO management requires technology that can:
- Integrate with existing scheduling and accounting systems
- Support approval workflows and business rules
- Provide real-time budget tracking and validation
- Handle emergency bypass and documentation
- Generate reports and analytics for management
## The Bottom Line
PO discipline isn't just about following rules—it's about getting paid. Contractors who master PO management get paid faster, have fewer disputes, and build stronger relationships with builders.
The technology exists to make PO management systematic and efficient. The question isn't whether you should adopt it, but how quickly you can get started.
Ready to transform your PO process and get paid faster? [Get started with BlueClerk today](https://app.blueclerk.com) and see how systematic PO management can improve your cash flow and reduce payment disputes.