Hello! Would like to talk about subcontract operation purchase orders. We recently started having requirements for subcontracts more frequently and taking advantage of the subcontract operation.
Our business is project based, and everyone in the industry does progress billings. This means we could have a PO for $120,000 and get multiple invoices throughout the project that are NOT even increments of the PO amount. Let’s say the first invoice is for $24,650, which would give me a partial receipt quantity of 0.2054166666666667.
Our business policy requires that the job receives the cost of the invoice upon receipt. To accomplish this, we would typically receive the PO for a partial quantity (as opposed to using Advanced Billing in AP Invoice Entry). However, we can’t produce an accurate receipt amount ($) with these partial quantities.
To get around this, I’ve been adding lines to the PO every time an invoice comes in, which is very time consuming and creates room for error. I’ve also considered using the Advanced Billing function and doing job adjustments, but again, time consuming.
How are you getting around this? What are you doing to pay partial subcontract PO invoices, while also costing to the job upon receipt?
With each invoice for the progress billing, add a new invoice with an advanced bill line. Once the part is received, the PO Receipt is done and the next invoice should be the balance due for the part.
Thanks, Charlie! My problem with using Advanced Billing invoice is that I need the cost to hit the job when this invoice comes through. My understanding is that the job won’t see the cost until the PO Receipt is entered, which is what I’m trying to avoid.
Hi! That is what we normally do, with material receipts. However, with our subcontractor invoices, our vendors use progress billing, which makes receiving difficult.
They could invoice a random dollar amount that isn’t an even increment of the original PO. If a vendor invoiced $50k on a $100k PO, then I could receive 0.5 quantity. But our situation is more like trying to receive $25,765 on a $136,000 PO (one line with quantity 1 at unit price of $136k), for example.
Is there a way to receive a dollar amount instead of a quantity to a PO?
So the cheesy way to do that, and we have done it, is make your unit cost one and your quantity the dollar amount. Some suppliers don’t like it but it does work.
A BETTER solution, would be a real blanket purchase order capability. That way, you would have the total amount of the order and have a releases created that deducted from the total.
Aside from Mark’s suggestion of entering the PO for 136,000 “units” at $1 each, How does the sub actually bill? Or is it just an amount, and not a qty and price per?
I’m interested in the solution, as we have a similar issue where our subcontracting is for field services (like drilling a well). This is something we’ll never physically receive, but needs to be charged against the “project”. (I put project in quotes because we’re not actually doing it as a project, but rather a line item on the order.)
If it requires drilling one well, we’ll get a single invoice - which magically always matches the quote, no matter how long the drilling actually took. If it’s for a field of wells, spread out over some time - like weeks or months - we’ll get bills that approximate the progress (and always seem to be rounded up). The last bill is always for an amount equal to the PO - all prior billing.
…make your unit cost one and your quantity the dollar amount. Some suppliers don’t like it but it does work.
This is what I needed to hear! Seems obvious now I could just create a new report style if the vendor has an issue.
A blanket PO function would be fantastic! I may try looking into the KanBan functionality, but to get by without implementing new processes, your first idea will work great!
@ckrusen ours subs just bill an amount (it’s actually a fairly involved process with AIA forms and whatnot), so I am going with Mark’s qty. at $1/ea idea!
Ours is like field service too with no physical receipts. But that would be tough if they are rounding up the progress invoices. Could you all push back on the vendor and require even increments of the PO, for the “field of wells” situation?
There’s no real need to. We contract the driller for 25 wells, at some total cost (say $40,000 for example). And who’s to say that the first 10 wells didn’t take 50% of the time, with the last 15 going faster?
We’re going to eventually pay the the total $40,000.
Just like when we charge for a project service.If we estimate 50 hrs at $200/hr, we’ll quote for a qty of (1) "Project Service ", at $10,000. If we it only takes us 45 hours, we still bill the whole $10,000. If it takes over 50… then we’ll examine why. If its the customers fault (like not having the site prepared), then we’ll try to get the difference from them.
The only problem I see is the SubPO is linked to the job and changing the qty to create a $1 per might create an adverse situation. Since you do not want advance bill, a partial receipt with the price override when invoiced. This could
create a PPV at the outset, but should balance itself out with the final receipt.
BTW, @CTCharlie has forgotten more accounting than I’ll ever know. He brings up a good point. We are creating releases manually so we don’t have that issue.
@Mark_Wonsil@CTCharlie thank you!! I believe we will be avoiding that too. I will only do this $1/ea method for new purchase orders, so it shouldn’t produce a PPV.
I could just create a new report style if the vendor has an issue.