Purchase Orders are used by contractors for any larger purchase on a project. This is typically a threshold that is set by a company, Ex: $5,000+, but can also vary by the item(s) being purchased. You may forgo a purchase order for a large hardware store purchase, but will likely want one for a specialty/custom item, especially if there are warranty requirements.
Purchase Orders are vastly important in ensuring that the product being ordered is exactly as written and meets all of the requirements, terms and conditions. There's a lot that can go wrong when making a purchase, so having a strong purchase order protects everyone from unintended or unwanted changes.
The Purchase Order will set the cost of materials and shipping at a minimum, but it can also determine the date submittals are required, date the materials are required, warranty terms, payment terms, legal terms and much more. Below, we will walk you on how to fill out a Purchase Order form.
1. Draft a sample Purchase Order at the beginning of each project
a. Long form Purchase Orders should be used for all major purchases (Example: $5000+)
b. Short form Purchase Orders can be used for smaller purchases that have less liability
2. Fill out the Purchase Order Form on Excel, Word, or a similar program
a. Describe in detail all material requirements, and reference drawings & specifications
b. Specify what is and what is not included in the total price
c. Note any required warranties and the time span of the warranties
d. Break down the total cost as well as the State and County Tax
3. Save Purchase Order Form as a PDF File and combine it with any applicable quotes/documents
4. Send an Email or Mail copy of the Purchase Order to the selling party (let the other party sign first)
5. When you receive a signed copy, examine carefully for any edits the selling party may have made. It is common for them to cross off or modify paragraphs.
a. If you are in agreeance to the changes (if any) sign and send them a fully executed copy
b. If you do not agree to certain terms, negotiate and sign a mutually accepted copy
6. Document the Purchase Order in your Purchase Order Log with the following information:
a. Purchase Order Number
c. Date Sent & Date Finalized
d. Total Cost
7. Upon receiving the Executed Purchase Order do the following:
a. Notify any affected parties, such as the following:
i. Superintendent/Field Lead
ii. Project Manager
iii. Any other affected parties (owner, etc…)
b. Save Executed Purchase Order in your Purchase Order Folder
c. Send any related submittals to the engineer for review
d. Finalize details and order the materials promptly
Download our Purchase Order Form template for excel here.
Make sure you include costs for both State and County/Local Taxes in the Purchase Order.
As a best practice, include a page notifying the other party that any changes made to the Purchase Order need to be detailed in a separate sheet. This will make any changes to the contract clear, so that they are not missed.
Always save a paper copy of your signed Purchase Orders, in the case that the electronic copy is deleted (intentionally or not). Having the original signed copy will also hold better should it ever go to court.
Commonly missed additions to the Purchase Order are warranty terms and required spare parts. Be sure to research these items on your specifications, and add them in.