Estimates vs. Purchase Orders: What’s the difference?
Estimates and Purchase Orders can be created using QuickBooks. Many people want to know what the difference between the two are and when it is appropriate to use them.
I often see a lot of confusion on the QuickBooks forums about Estimates and Purchase Orders, what the differences are, and when you should use each one.
An Estimate, otherwise known as a Bid, Proposal, Quote or perhaps even a Schedule of Values in the construction industry, is a detailed breakdown of work or tasks that you will perform in order to complete a project for a specific customer or a specific job and what you will charge them to do it.
A Purchase Order, on the other hand is normally something that you issue for materials or the services of some else that you need to purchase in order to complete a project that you are are working on and can be used to track your expenditures.
“I’ve received a Purchase Order from a customer or client, how do I enter that into QuickBooks?”
When you receive a PO from a customer or client you enter it into QuickBooks using the Estimate form and you then invoice from that Estimate according to how much of the work or project you have completed – this is known as Progress billing or percentage of completion billing.
“I’ve subcontracted out part of a job to another contractor for a specific amount, how do keep track of how much I’m really paying so I’m not overcharged?”
In this case you would enter the information into QuickBooks using the Purchase Order form, as the subcontractor submitted his bills or invoices to you, you would then apply them against the PO. If the original amount was $1,000.00 but he submitted bills or invoices totaling $1,200.00 you’ll easily see the difference.
“I’m trying to find a report to track construction bids with payments. I was trying to use the PO tracking, but cannot get it to show payments received, open balance and/or percent complete.”
In this case using an Estimate combined with Progress Invoicing is the most appropriate solution.
Terminology can be confusing, so remember this simple solution:
Use the Estimate form to track money in and the Purchase Order form to track money out.
I hope you’ve found this post to be helpful, if so please take a moment to either leave a comment or share it with others on your favorite social media network.
Leave a Reply
- The Great Debate – QuickBooks Desktop vs. QuickBooks Online
- Using Account Numbers in Your QuickBooks Chart of Accounts
- QuickBooks Creating a More Meaningful Payroll Expenses Section
- Calculating & Displaying Fringe Benefits on a Certified Payroll Report
- How To Turn On and Use Manual Payroll in QuickBooks
- QuickBooks Payroll Tip - Tracking Employee Advances or Loans
- QuickBooks Tip - Child Support Garnishments
- Create a QuickBooks Job Cost Report With Hours & Payroll Costs
- QuickBooks Tip - Job Costing Starts With A Simple Item
- QuickBooks for Contractors Tip – Basics of Progress Invoicing
- QuickBooks Tip-Creating a Functional Payroll Liabilities Section
- Welcome to the QuickBooks for contractors blog
- QuickBooks Tip: Important Facts About Items Left as Billable
- QuickBooks Tip-Handling Employee Reimbursements for Expenses
- QuickBooks Tip - Determing Cost of Goods Sold
- Straight from the IRS - Social Security Tax Reduced to 4.2%
- QuickBooks 2013 Upgrade Do's, Don'ts & Frequent Questions
- QuickBooks 2015 Announced - Important System Requirements
- QuickBooks 2012 - Frequently Asked Questions About Upgrading
- QuickBooks 2015- The Good, Bad and Ugly, Part 1