Customer PO: What It Is and How to Get Paid by Purchase Order

A customer PO is a purchase order your client issues to you. It is their written commitment to buy a defined scope of work at a defined price, and it carries a number their accounting system uses to approve your invoice. "Pay by PO" means the client will not pay at the door. They issue the PO first, you do the work, you invoice against the PO number, and they pay on the agreed terms. The rule that protects you is simple: get the PO before the work starts, check that it matches your quote, and put its number on every invoice.

Most service businesses meet purchase orders from the buying side first. You send a PO to a supplier for pipe or pavers. A customer PO is the same document pointed the other way: now you are the supplier, and a property manager, a school district, a hospital or a general contractor is the buyer. The paperwork is theirs and so are the rules. Learn the rules and commercial work pays reliably. Ignore them and a finished job sits unpaid for weeks over a missing number.

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What a customer PO is

A customer PO, sometimes written "cust PO" on forms and invoices, is a purchase order issued by your customer to your business. In business, PO means purchase order: a document a buyer sends a seller that says what is being bought, for how much, and on what terms.

It does three jobs on the client's side:

• It authorizes the spend. Someone with budget authority approved this amount for this work before anyone was hired.
• It reserves the money. The amount is set aside against a budget line so the invoice has something to be paid from.
• It gives accounts payable something to match. When your invoice arrives, the accounts payable clerk checks it against the PO. A match gets paid. No match gets set aside.

For the full picture of the document from the buyer's chair, see what a purchase order is and how the process works. This guide stays on the seller's side: you received one, and you want to be paid.

What "pay by PO" means

"Pay by PO" and "pay by purchase order" describe a process, not a payment method. The money still arrives by bank transfer, check or card. What changes is the order of events:

1. You send a quote.
2. The client approves it internally and raises a PO.
3. You receive the PO and confirm it matches the quote.
4. You do the work.
5. You invoice, with the PO number on the invoice.
6. Accounts payable matches the invoice to the PO and pays on the terms, usually net 30.

A client who says "we pay by PO" is telling you two things. First, you are extending credit: the work comes before the money. Second, their system will not release a payment without a PO number, no matter how happy the site manager is with the job.

What "PO raised" means

"The PO has been raised" means the client has created and approved the purchase order in their system. It exists, it has a number, and money is committed to it.

Three phrases sound similar and mean different things:

"PO to follow" is the one that costs contractors money. The person asking you to start is rarely the person who approves the spend. If the PO is never approved, or comes back for less than your quote, you have already done the work. Ask for the number, or at minimum an email from someone with authority confirming the amount, before a truck rolls.

What to check on a customer PO before you start

Read the PO the day it arrives. It takes five minutes, and every mismatch is easier to fix before the work than after the invoice.

• Your business name and address. The legal name on the PO should be the name on your invoice and your bank account. A mismatch can hold a payment.
• The PO number. Copy it exactly, including prefixes, dashes and leading zeros.
• The scope. It should describe the work you quoted. A PO that says "HVAC repair" against a quote for a compressor replacement is fine. A PO that names a different building is not.
• The PO price. The amount on the PO is the most the client's system will pay against it. It should equal your quote total, including tax if you charge it.
• The payment terms. The PO may say net 30 when your quote said net 15. The PO usually wins inside their system, so settle the difference now. Invoice payment terms explained covers what each term means in days.
• Dates. Some POs expire. Work done or invoiced after the end date may need a new one.
• Where to send the invoice. Many companies only accept invoices at one accounts payable address or through a portal. An invoice emailed to the site manager may never reach the person who pays.
• Attached terms and conditions. Read them. They can carry insurance requirements, retainage or a long payment clock. If something in them changes your price or your risk, raise it before you accept.

If anything is wrong, reply in writing and ask for a corrected PO. Do not fix it in your head and move on. The invoice will be matched against the PO as written.

How to put the PO number on an invoice

Give the PO number its own labeled line near the top of the invoice, next to your invoice number and the date. Do not bury it in the notes or the email body, and do not use it as your invoice number.

• Label it clearly: "PO number" or "PO #".
• Match it character for character.
• Keep your own invoice number in your own sequence. The PO number is the client's reference and yours is yours. How to number invoices covers why the two never mix.
• One PO per invoice unless the client tells you otherwise. Two jobs under two POs are two invoices.
• Make the invoice lines resemble the PO lines. If the PO has one line for labor and one for materials, an invoice with the same two lines is matched in seconds.

Everything else an invoice needs is in how to write a contractor invoice.

The PO price is a ceiling

An invoice for more than the PO amount does not get partly paid. In most accounts payable systems it gets rejected whole, and the payment clock does not start until a corrected invoice arrives.

This is where extra work goes wrong. The site contact asks for one more thing, you do it, and you add it to the invoice. The site contact had no authority to raise the PO, so the invoice no longer matches.

The fix is to treat the PO like the contract it is. When the scope grows, stop and get one of two things before doing the extra work:

• A revised PO for the new total, or
• A second PO for the added work, which you invoice separately.

Price the addition the same way you would any change order: in writing, with a number, approved before the work.

A worked example: the $650 that delayed $8,400

A mechanical contractor quotes a property management company $8,400 to repair a rooftop unit. The client raises a PO for $8,400 on net 30 terms.

During the repair the technician finds a failed contactor. The building engineer says to replace it. The part and labor come to $650. The contractor finishes on March 3 and invoices $9,050 the same day.

Here is what happens next:

Had the invoice matched, the $8,400 was due April 2. The mismatch moved it to April 20: eighteen days of waiting on the whole amount to settle a question about $650. The $650 waits longer still, until someone approves a PO for work already done.

The better path took one phone call. Before replacing the contactor, the contractor asks for a revised PO or a second one. If the approval takes a day, the invoice for the original $8,400 still goes out on March 3 and is paid on time. That delay shows up directly in your days sales outstanding, and it was avoidable.

Blanket POs for ongoing work

For repeat work, clients often issue a blanket PO, also called a standing or open PO: one number and one total that cover many invoices over a period. It is common on recurring maintenance contracts and on time and materials work with a not-to-exceed amount.

A blanket PO works like a prepaid balance you draw down. You have to track what is left, because the client's system will reject the invoice that crosses the total.

Take a landscaping company with a $24,000 blanket PO for a year of grounds maintenance, billed at $2,000 a month.

In October the client asks for $1,800 of storm cleanup. If that is invoiced against the same PO, $7,800 of work is chasing $6,000 of PO, and December's invoice bounces. Ask for an increase to the blanket PO, or a separate PO for the cleanup, before the crew goes out.

Keep a running total per PO: amount, billed to date, remaining. Check it before each invoice and before agreeing to any extra work.

What to do when the client has no PO

Not every commercial client uses purchase orders, and some that do skip them under a dollar threshold. If you are told no PO is needed, get the approval in another written form before you start:

• A signed quote, or
• An email from someone with authority that names the scope and the price.

Then ask one question: "What does accounts payable need on the invoice to pay it?" Some want a cost center, a work order number or the approver's name. Whatever it is, it goes on the invoice in the same place a PO number would.

For homeowners and small businesses, none of this applies. A signed quote and an invoice are enough.

When a PO invoice is not paid

Most late PO invoices are stuck, not refused. Work through the list in order:

1. Confirm it was received at the accounts payable address or portal, not only by your site contact.
2. Ask for its status by PO number and invoice number. "Approved for payment", "awaiting approval" and "not on file" are three different problems.
3. Fix what they name. A wrong PO number, a missing form or an amount over the PO is corrected and resent the same day.
4. Ask who approves it. Many systems hold an invoice until the person who ordered the work confirms it was done. A short note to that person often frees the payment.
5. Follow up on the due date and after it, the same way you would any receivable. How to track accounts receivable and what to do when a client won't pay an invoice cover the steps from there.

The PO helps you here. An approved PO, a matching invoice and proof the work was done make a clean record of what was agreed and delivered.

FAQ

What is a customer PO?

A purchase order issued by your customer to your business. It states what they are buying, the price and the terms, and it carries a number their accounting team uses to approve and pay your invoice.

What does pay by PO mean?

The client issues a purchase order before the work, you invoice against the PO number after the work, and they pay on the agreed terms. It is a process for approving and paying an invoice, not a way of sending money.

What does PO mean in business?

Purchase order. A document from a buyer to a seller that commits the buyer to purchase specific goods or services at a specific price.

What does it mean when a PO is raised?

The buyer has created and approved the purchase order in their system. It has a number and money is committed to it. "Raising a PO" means the request is still in progress.

Is a customer PO the same as an invoice?

No. The PO comes from the buyer before the work and says what they agree to buy. The invoice comes from the seller after the work and asks for payment. The PO number on the invoice ties the two together.

Can I start work before I receive the PO?

You can, and you carry the risk if it is never approved or is approved for less. Wait for the PO number in writing, or get written approval of the price from someone with authority.

What if my invoice is more than the PO price?

Expect it to be rejected. Invoice the PO amount against the PO, and get a revised or second PO for the difference. Better still, get that approval before doing the extra work.

Where does the PO number go on an invoice?

On its own labeled line near the top, beside your invoice number and date. Never in place of your invoice number.

What is a blanket PO?

One purchase order with one total that covers many invoices over a period, such as a year of monthly maintenance. Track the remaining balance so no invoice exceeds it.

Does a purchase order mean I will definitely be paid?

It means the spend is approved and budgeted, which is most of the way there. You still have to do the work, invoice correctly and meet the terms on the PO. Read any terms attached to it, and ask a lawyer about anything you do not understand.

Getting started with CRMb

CRMb has a PO # field on every quote and invoice. Enter the client's number once and it prints on the PDF and on the link the client opens, stays on the document when the quote becomes an invoice, and comes along when you duplicate last month's invoice for a blanket PO. Pick Net 30 and the due date is set, reminders go out on the schedule you choose, and open invoices sit in the A/R aging report by age. The purchase orders you send to your own suppliers live in Purchasing. Every plan starts with a 14-day free trial, no card required.