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Tips for Effectively Using QuickBooks Purchase Orders

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Using Purchase Orders and running the Open Purchase Orders by Job report in QuickBooks are excellent tools for General Contractors as well as Subcontractors who sub out a portion of the job to someone else.  Purchase Orders can also be customized and used to record a verbal bid for materials from a supplier as well as using them to create an Invitation to Bid, which will ultimately be sent to several subcontractors at once.

Using Purchase Orders in QuickBooks can help you to ensure that your Subcontractors or Material Suppliers do not charge you more than what they originally quoted you for a price and the Open Purchase Order by Job Report can help you to see how much in committed costs there are left on your jobs.  Both very valuable pieces of information.

Having said that, you do have to use the QuickBooks Purchase Order function correctly and there are several pitfalls that can happen, that you will want to avoid.

Tips for effectively using QuickBooks Purchase Orders

  1.  Try to issue Purchase Orders by Job (even though you may have several jobs that use the exact same Cost Code/Item for a specific Vendor)
  2.  ALWAYS enter a Quantity – using Quantities provides you with an accurate Open Purchase Order by Job Report (if  you have a subcontractor who provides you with a flat rate of say $10,000.00 without a quantity – in the Quantity Column enter 10,000 and in the rate column enter $1.00)
  3.  Use the Memo field to type in the Cost Code/Item and Job Name  (this will help you select the right Purchase Order when entering bills)

Below is a sample of a correctly setup and issued Purchase Order.

Right click to enlarge this image

Right click to enlarge this image

Once we’ve recorded this Purchase Order, this is how it appears in the Open Purchase Order by Job Report.

Right click to enlarge this image

Right click to enlarge this image

Tips for Entering Bills against existing Purchase Orders

Just setting up your Purchase Orders isn’t all there is to it.  You also have to Enter Bills against existing Purchase Orders correctly.  To do that:

    1.  Go straight to Enter Bills
    2.  Type in the Vendor Name (QuickBooks will tell you that you have Open Purchase Orders for this Vendor and if you want to receive against one or more of them – click the Yes button)
    3. QuickBooks will then display an Open Purchase Order window displaying all of the PO’s that I have with this specific vendor.  Because I utilized the memo field on the PO to hold my cost code and a job name, it’s quick and easy for me to select the correct one
    4. Right click to enlarge this image

      Right click to enlarge this image

    5. When QuickBooks brings in the information from the Purchase Order to the Bill, it brings in the FULL VALUE of the Purchase Order – so you’ll need to adjust the quantities and amounts based on the Subcontractors invoice to your company.    So let’s say that your sub billed you for 40% of the Purchase Order – you would need to calculate 40% of $10,000.00 ($4,000.00) you’d enter $4,000.00 in the Amount Due field and 4,000 in the Quantity field and everything else will adjust.
    6. Right click on the image to enlarge it

      Right click on the image to enlarge it

    7.  So now let’s see how our Open PO by Job Report looks – you should see the original amount, the amount you received and then open balance on the Purchase Order.
    8. Right click on the image to enlarge it.

      Right click on the image to enlarge it.

 

I hope you’ve found these tips to be helpful, if so please consider leaving a comment or sharing it with others on your favorite social networks.

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About Your Host:

Nancy Smyth, Certified QuickBooks ProAdvisor

Nancy Smyth, Sunburst Software Solutions, Inc.
QuickBooks Construction & Payroll Expert


I've been using and supporting QuickBooks products since the early 1990's. I've worked with thousands of contractors, assisting them with QuickBooks setup, Certified Payroll Reporting requirements, AIA Billing and Weighted-Average Overtime.


QuickBooks is a powerful product, but learning how to use it in your construction business can be difficult. I hope you find resources available here to be helpful.

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