Why Use Purchase Orders/Subcontracts?
Purchase orders/subcontracts track the costs of a project. By definition, they are the contracts that determine the sale conditions. They spell out price, delivery specifications, payment guidelines and other terms. From an accounting perspective, there are two benefits of using purchase orders/subcontracts for construction materials and supplies: A purchase order/subcontract allows contractors to track the monetary, or billing, aspect of the transaction so that they can see not only committed costs, but also the remaining committed costs (expenses that are forthcoming but have not yet been billed) throughout the life of a project. A purchase order/subcontract creates a system for tracking the physical, or quantity, aspect of the purchase agreement so that contractors can better manage the materials/work needed for jobs or supplies held in inventory.
