Purchase orders: committed spend before the invoice

Why a production issues POs at all

A production's accounts payable process can run on trust right up until it can't. A department head calls a vendor, orders a lens package or a load of lumber, and the first document the accounting office ever sees is the invoice — after the goods are consumed and the price is whatever the vendor says it is. A purchase order reverses the sequence: the production states what it is buying, in what quantity, at what agreed price, and authorizes that spend before delivery.

Once the vendor accepts it, a PO functions as a binding record of the agreed terms. That matters twice over: it gives the production's accounting office a commitment to track against the budget before cash moves, and it gives both sides a document to point at when the invoice doesn't match what anyone remembers agreeing to.

The chain: requisition, approval, order, receipt, match

The full cycle runs in distinct steps. A department requests the spend; the request is approved against the budget by whoever holds authority for that category; the approved PO goes to the vendor; goods or services arrive and are checked against what was ordered; the vendor invoices, referencing the PO; and accounting matches the three documents before payment — order, receipt, invoice. Two-way matching compares PO to invoice; three-way adds the receipt.

Every skipped step shows up later as a specific failure. Skip the approval and spend exceeds budget with no one accountable. Skip the receipt check and shortages or substitutions surface after the truck leaves. Skip matching and the production pays the invoice amount rather than the agreed amount — and over a shoot, small mismatches compound.

• •Request → approve → order → receive → invoice → match → pay.
• •The PO is the commitment; the invoice is the claim; matching proves they agree.
• •Any step skipped converts a controlled purchase into an uncontrolled cost.

Committed spend in the cost report

The reason POs matter beyond single transactions is committed cost. An open PO is money already promised — a liability the production carries today even though no invoice exists yet. A cost report that shows only paid invoices understates the production's true position every week by exactly the sum of its open commitments.

This is the mechanics behind the accounting distinction between cost and commitment: a production can be under budget on paid costs and already over budget the moment open POs are counted. Tracking commitments as they're issued — not at invoice time — is what lets a producer see the overage coming while there's still time to cancel the order rather than absorb the cost.

Numbering, caps and the audit trail

PO discipline is mostly bookkeeping hygiene: unique sequential numbers so vendor invoices can reference them; the budget account each order draws from, so commitments land in the right category; and amounts, delivery dates and payment terms stated in the order rather than negotiated at delivery.

For incentive and audit purposes the PO is often the primary evidence that a cost was incurred for the production, on the dates claimed — which is why auditors ask for the order, the receipt and the payment together. A PO log kept as data rather than a folder of PDFs answers those requests in minutes.

How Clarice handles this

Clarice runs the full chain: purchase orders carry their budget category and status, route through approval, and link to the vendor invoices that settle them. Budget lines connect to their POs, so committed spend shows in the project's reporting alongside paid costs instead of surfacing at invoice time.

Vendor-submitted invoices reconcile against the POs they reference, and the approval history — who approved what, when — lives on the record for the audit export. The GL posting follows the same account mapping as the rest of the production's accounting, so a PO's cost lands where the budget always said it would.