Work orders and purchase orders are often used interchangeably in business. Yet they really have a lot of important distinctions. If you’re wondering when or how to use each type of order, read on to learn more about both:
A purchase order, also called a sales order or PO, is a legally binding document which details what a buyer is purchasing, such as a good or service. The PO is made by either the client or customer and then sent to the correct vendor. As such, every company, from a global enterprise to a small business, will both create or receive purchase orders in their regular purchasing process.
If your company provides a good or service, you will receive POs, although you are free to use your own formatting to ensure consistency. If you are sending a PO to a vendor or supplier, you will likely use a form template to ensure orders on your side contain all relevant details, such as purchase order approval from higher ups.
A PO number is made to identify the purchase as it passes between different departments at the company fulfilling the order. Purchase order software can automatically generate these numbers whenever an is created. Each order will be labeled with a purchase order number for both sides to reference in future interactions.
At some companies, POs are combined with invoices, although there are still some differences between purchase orders and invoices. Primarily, both will list purchase details like quantity of goods, anticipated delivery date, customization options, and occasionally the total amount due. Even at small businesses with limited resources, they will have separate purchase and invoice numbers to separately track progress and payment.
A work order (WO) includes the actual documents a business uses to ensure a project is completed, listing exactly how and when everything needs to be done. Some work orders refer specifically to internal maintenance work, though this can vary. Others may resemble a purchase order by including information on the purchase of goods from a business.
A work order might include the following information:
Once completed, the work order may be sent to management for review and approval. Or, depending on what work is detailed, it might be automatically sent to the various departments involved to begin immediately without the need for further authorization.
A maintenance work order may also be called a service order, and these terms are almost completely synonymous. Each determines the necessary workflow for a project from start to finish. For example, a maintenance work order may detail exactly what tasks must be completed to fix a broken pipe at a manufacturing facility. This might include a step for shutting off the water, ordering a replacement pipe, and scheduling a plumber or maintenance employee to make the actual swap. Without a work order, the plumber might show up only to learn no spare part was ordered, wasting time and money. By listing out all relevant tasks in advance, nothing gets overlooked.
Based on the above, the general difference between work and purchase orders should be clear: one requests a good or service, the other details how that good or service should be completed. And for some businesses, work orders are only used for managing maintenance while POs play a critical role in B2B procurement practices. Yet there are some circumstances where the two can overlap.
Like a purchase order, some work orders are actually arranged by the buyer and delivered to the seller. This may happen when the buyer is after something very specific and they need to lay out exactly how their order should be fulfilled. One example of a customer defining the work order may be them requesting a specific employee working on a task, rather than allowing the company to assign someone from that department at random. Or the client might set out the project timeline based on their own schedule. Of course, all these details can also be laid out in a purchase order, although that is a legally binding contract and a work order is not.
The next key difference is who creates each order. The purchase order process will always originate with the buyer of a good or service. Work orders, however, have many potential points of origin. A customer might submit a work order for repairs on a purchased product, or a safety officer might put in a maintenance request after an audit. Even the business owner could be the one to put in a work order in the right circumstances. The work order number might include identifying details to clarify where each order originated.
Purchase orders are also important for balancing invoices in accounts payable. Work orders do not have an impact on your received revenue since it is primarily internal. Each might reiterate payment terms, though only the PO is legally binding.
Finally, work orders automation is possible through computerized maintenance management software (CMMS). They can create a template document identifying what maintenance work needs to be done and how it should be accomplished. It’s even possible to use advanced features for rules-based approval management, scheduling, initiating change orders, and real-time reporting on task progress.
With so many orders, you might be wondering which comes first. In general, work orders are made after a purchase order has been received by a company. For instance, a company might request a highly specific service with several predetermined conditions, such as due date and time frame, which influences the creation of the internal work order. As such, it’s easier to create a work order after a PO has been received.
However, there are a few industries where a work order might be prepared before an official PO is received due to the time necessary to complete an order. This would mostly occur during the quote or estimation process, if the company knows the sale is likely to go through. Or it might happen in the event of expediting recurring orders from a returning customer.
Depending on your exact line of business, you might need a system to create purchase orders and work orders. Fortunately, software makes it possible to automate the entire process for both types of orders.