Construction procurement is much more complicated than just ordering construction supplies from suppliers. One construction supply order may include several steps such as approvals, purchase orders, deliveries, invoicing, and paying the supplier. But if construction procurement is conducted by using e-mails, spreadsheets, or various systems, then there is an increased risk of omitting some information, overspending on the order, getting unnecessary products, and being late with payment.
An existing construction procurement flow ensures that each order is completed following the defined steps from order to payment. This will ensure that everyone knows what was ordered, to which construction project it relates, what has been delivered, and what needs to be paid.
An efficient purchase order system in construction enables project managers to closely monitor costs and suppliers’ activities compared to a poorly organized process. With the right process and construction purchasing software, businesses can connect purchasing, project budget control, deliveries, and invoices in one place.
But how can construction companies simplify their purchasing process from request to payment? In this blog, we will break down the process step by step.
Start With a Clear Purchase Request
Every purchase in construction begins with an exact written request. Before anyone gets in touch with the supplier, the person requesting the material must define the particulars of what is needed: how much material is required, for what project, and by when.
The request “We need more tiles” allows for too many misinterpretations. The team could place an order with the wrong size, quantity, or characteristics. Moreover, two different employees could place an order for the same requirement.
A better request should include key details such as:
Material or product name and specifications
Required quantity
Project or job reference
Required delivery date
Estimated cost, if available
Preferred or approved supplier
Relevant cost code or budget category
Purchase Approver
A number of construction projects will involve a number of suppliers, a number of spreadsheets, a number of emails, and a number of documents. In some instances, tracking all this information in regard to orders made, received, invoiced, and payment of the same will be quite challenging for the project manager. This is where construction supplier management software steps in to facilitate this integration.
Our ERP software allows you to have everything organized in one place: suppliers, prices of the suppliers, the purchase orders, purchase invoices, and payments. You can get quotes from multiple suppliers, make a purchase order based on your preferred prices, and monitor the whole process.
Turn the Request Into a Purchase Order
After obtaining authorization for a purchase request, the next step will be the purchase order creation. The PO represents the details concerning the order and acts as a reference document for the team.
An efficient construction purchase order must mention the supplier name, project being managed, items, quantity and item cost, delivery address and delivery date, and payment terms and conditions. The PO must also be associated with a specific project or category of costs to monitor an expense.
The effective management of POs in construction projects involves not treating each PO differently but knowing the order and identifying what was delivered and what is pending. The same data can also be used during the invoice process. The team can validate the invoice against the order and delivery prior to releasing for payments.
An integrated ERP software for construction can assist in avoiding double data entry and providing the managers with a clearer view of planned costs.
Check the Delivery When It Arrives
However, many teams do not perform this stage, yet it is quite essential.
Firstly, when you receive the delivery, a person responsible for materials at the construction site needs to check the materials against the purchase order and record the real data of how much material was received.
In construction project, the delivery takes place in steps. If you need 100 items and only 60 were received, write that 40 more items are still due to be delivered. In this way, everyone will know what should be delivered.
Moreover, make a copy of the delivery slip and add it to the purchase order. It will take no more than five seconds, and it is the proof you need just in case your supplier does not agree with you later. Our OnSitePro mobile application enables reporting materials from the construction site directly, i.e., received or consumed.
Match the Invoice Before Anyone Pays
When an invoice arrives, check it against two other documents: the purchase order and the delivery record. This is called three-way matching. If the quantities and prices are the same in all three, the invoice is correct and can be approved.
For small orders from a supplier you trust, comparing just the purchase order and the invoice is often enough.
In construction, the documents do not always agree. A supplier may send a different product when an item is out of stock. The price may change between the quote and the delivery. The same delivery may also be billed twice, once on a progress invoice and again on the final invoice.
If you find a difference, do not pay yet. Ask one person to find out what caused it, and let one person decide how to fix it. This way, you pay only for what you ordered and received.
Keep Approvals Moving
Project managers spend most of the day on site, not at a desk. An invoice that arrives in their inbox with no context tends to wait there.
To approve it, they need the invoice, the matching PO, the cost code, and the budget that's left, all in one view. If they can open that on a phone, approval takes a few minutes. Otherwise, it can take a week.
Paying on time matters as well. A supplier who gets paid promptly is far more likely to pick up the phone when you need materials in a hurry.
How Bouwflow Helps Streamline Construction Purchasing
Many construction projects require many suppliers, many spreadsheets, many emails, and many files. At times, keeping track of everything that comes in, in terms of ordered materials, received materials, invoicing, and payment of the same, may become a difficult task for project managers. That’s when construction purchasing software comes into play and helps to integrate everything.
With Bouwflow construction ERP software, you have everything managed under one roof: your suppliers, supplier prices, purchase orders, purchase invoices, and payment. You can get a quote from many suppliers, issue a purchase order for the selected price, and follow up on the order throughout the entire process.
Further, you cab compare supplier prices and to automatically select the supplier of the article during the creation of an order. After receiving materials, one can record delivery and compare order, delivery and invoice.
Then the purchase invoices can be imported to Bouwflow via AI or Peppol, go through the approval process, and appear on the payment list. Since the purchases and invoices are linked to the project, the contractors can also have a clear understanding of real costs and margins of their projects.
Thus, we get a unified construction procurement process starting from price request, purchase order, delivery, invoice and ending with the payment.
Conclusion
The right construction purchasing process not only helps to effectively organize your orders but gives you greater control over your materials and suppliers. In addition, the documentation of this process enables you to control the costs and payments related to your purchases. All the stages of your purchasing process should be interrelated and traceable.
As the scale of your projects and your purchasing volume grows, it becomes increasingly difficult to manage everything via spreadsheets and emails. The connected construction procurement process will make it easier for you to control your orders, deliveries, payments, and projects.
Construction ERP such as Bouwflow will let you connect all these processes into one system and control your orders, your relations with suppliers, your purchase orders, deliveries, payments, and project costs all from one place. This will give you more time for project management rather than purchasing administration.
Do you want to automate your purchasing process? Find out how Bouwflow can assist you.
Frequently Asked Questions
Do I need a purchase order system for a small team?
Not at first. Put a PO number on every order and keep all orders in one shared sheet. Move to software when the number of orders grows.
How do I check an invoice for a lot or package order?
Ask the supplier to list what is in the lot. When it arrives, count the items and compare them with the invoice.
What if a supplier bills me twice for a backordered item?
Send the supplier the PO and the delivery record, and ask for a credit note. Mark backorders as pending on the PO so they are not billed before delivery.
Do I need to match every invoice?
No. Many contractors match all three documents only above a set amount. For small orders from trusted suppliers, comparing the PO and the invoice is enough.
What if a change is agreed verbally on site?
You can confirm it in writing the same day and update the PO. This keeps the invoice and the PO in agreement.
