Most property management operations already issue work orders. A tenant reports a leak, a work order goes to a plumber, the plumber fixes it and sends an invoice.

The question of purchase orders usually arrives from finance: shouldn't we be raising POs? The honest answer is sometimes, for some spend, and not as a blanket rule. A PO added to every small call-out can create paperwork without adding meaningful control. A PO missing from a $40,000 roof project leaves the most important number in the job unrecorded.

The useful question is not whether to use POs. It is which spend needs one.

What Each Document Does

They look similar and do different jobs.

A work order can carry a not-to-exceed amount, which is a lightweight version of a price limit. What it generally does not record is an approved price agreed in advance, which is what a PO adds.

When a PO Earns Its Place

Five situations where the agreed price is worth recording before the work starts.

1. Quoted or bid work. Anything where you obtained a quote or compared bids. The PO records the price you accepted, so the invoice can be checked against it rather than against memory.

2. Work above the owner's approval limit. Where the owner has approved a specific amount, the PO is where that approved figure lives. When the invoice arrives, the question is whether it matches what the owner said yes to. The approval matrix establishes who needs to approve; the PO records what they approved.

3. Capital projects. Roof replacements, system replacements, renovations. Larger amounts, longer timelines, staged payments and a meaningful chance of change orders. These also tend to need separating from routine maintenance in the accounts, and a PO makes the classification decision at the start rather than when the invoice arrives.

4. Materials purchased directly. Where you buy appliances, fixtures or supplies for a property rather than having a contractor supply them, a PO records what was ordered, at what price, for which property.

5. Recurring contracts. Landscaping, pest control, janitorial services at an agreed monthly rate. A standing or blanket PO for the contract period means each month's invoice is checked against the agreed rate without raising a new document each time.

When It Probably Does Not

• Small reactive repairs. A plumber called to a leak, charging under an agreed rate card, for a few hundred dollars. The work order, the rate card and the approval threshold are usually control enough. Adding a PO means someone raises a document that says nothing the work order did not.

• Emergencies. Where waiting would cause harm, the work comes first. A PO can be raised afterwards to record the agreed amount, but it should not be the thing that holds up the response.

• Pass-through costs with no discretion. Utility bills and statutory charges, where the amount is set by someone else and there is nothing to agree in advance.

The pattern: a PO is worth it where there is a price to agree and a risk that the invoice will not match it.

Matching the Invoice

The value of a PO shows up when the invoice arrives.

• Two-way match. The invoice is compared with the PO: same vendor, same scope, same price. Suits materials and fixed-price work where completion is not in question.

• Three-way match. The invoice is compared with the PO and with evidence that the work was done or the goods received. In property management, that evidence is usually the completed and verified work order, which is where the two documents connect. The PO says what was agreed, the work order says it was done, and the invoice says what is being charged.

Where the work order has not been verified as complete, the invoice may be held under the applicable payment controls. That is one of the legitimate reasons a bill ages, and it is worth recording as such on the aging report so it is not mistaken for a processing delay.

When the Invoice Does Not Match

Illustrative figures. An HVAC replacement was quoted and approved at $4,800. The invoice arrives at $5,350.

Three questions to settle before anything is paid.

1. Is it within tolerance? Set a variance tolerance in advance, as a percentage, a fixed amount, or whichever is lower. A variance inside it can be approved at the normal level. One outside it goes back to the approver. The tolerance should be a written policy rather than a judgement made invoice by invoice.

2. Was there a change order? Legitimate variations are agreed before the work, not discovered on the invoice. Where scope changed during the job, the change should have been recorded and approved at the time, with the PO amended.

3. Does the new total cross the owner's authority? If the owner approved $4,800 and the invoice is $5,350, the owner approved $4,800. Whether the additional $550 needs their approval depends on the management agreement, but it should never be absorbed silently because the original job was approved. Where it does need approval, the owner communication templates cover how to ask.

POs and Shared Costs

Where a job covers more than one property, the PO can be a useful place to document the split.

A contract covering three owners' properties can carry a line per property, each with its own amount, so the invoice arrives already attributable. That is considerably easier than splitting a single total after the fact, and it means each owner's approval can be tested against their own share from the start.

A Workable Policy

A short written policy covers most of this. Something along these lines, adjusted to your portfolio and agreements:

• PO required for quoted or bid work, capital projects, direct materials purchases, and work above the relevant owner's approval limit

• Blanket PO for recurring service contracts, covering the contract term and rate

• Work order sufficient for reactive repairs under an agreed rate card and below the owner's limit

• Emergency work proceeds on a work order, with a PO raised afterwards where the amount warrants it

• Variance tolerance set in writing, with anything outside it returned to the approver

• Change orders approved and recorded before the additional work, with the PO amended

The test for any addition to the list: does raising the PO record a price that would otherwise go unrecorded? If not, it is probably paperwork.

Frequently Asked Questions

1. What is the difference between a work order and a purchase order?
A work order is an instruction to carry out work: what needs doing, where and by when. A purchase order records an authorised purchase, including the agreed price, scope and terms, and who authorised it. A work order may carry a not-to-exceed figure, but it does not generally record an approved price agreed in advance.

2. When should a property manager use a purchase order?
Where there is a price to agree and a risk that the invoice will not match it: quoted or bid work, capital projects, materials bought directly, work above an owner's approval limit, and recurring service contracts, where a blanket PO can cover the contract term.

3. Do small repairs need a purchase order?
Often not. Reactive repairs charged under an agreed rate card and below the owner's approval limit are usually adequately controlled by the work order, the rate card and the approval threshold. A PO in that case can add paperwork without adding control.

4. What is three-way matching in property management?
Comparing the invoice with the purchase order and with evidence that the work was done. In property management that evidence is usually the completed and verified work order, so the three documents together show what was agreed, that it was done, and what is being charged.

5. What happens when an invoice exceeds the purchase order?
Check whether the variance is within a tolerance set in advance, whether a change order was agreed and recorded, and whether the new total exceeds what the owner approved. Variances outside tolerance should go back to the approver, and additional spend above an owner's approved amount should be handled as the management agreement requires rather than absorbed.

6. Should emergency repairs wait for a purchase order?
No. Where waiting would cause harm, the work should proceed on a work order under the emergency provisions of the management agreement. A PO can be raised afterwards to record the agreed amount where it warrants one.

Record the Price Where There Is One

A purchase order is not a control in itself. It is a record of an agreed price, and it is only as useful as the matching done against it when the invoice arrives.

Where there is a price worth agreeing, record it before the work starts. Where there is not, the work order already says what it needs to.

RIOO is a property management platform built on NetSuite, with service requests and work orders, vendor management and accounts payable and property accounting in the same underlying system.

Note: Guidance in this article is general. Spending authority, emergency provisions and approval of variations are governed by each management agreement. Figures and policy thresholds shown are illustrative.