By Aaron McLeish · 9 min read
Picture this. You’re a plumber or heating engineer with three or four team members. Work is solid. You’re quoting well. The van is out every day. But at the end of the month when you look at your bank balance, something does not add up. You know roughly how much came in. You know roughly how much went out. But between those two numbers, there is a gap you cannot quite explain.
Then one day you sit down with your accountant, or you decide to actually look at where the money went, and you realise the same thing every trades business owner eventually discovers: your materials spend is leaking everywhere, and you have no idea which jobs are bleeding it away. You cannot tell if the boiler components you bought last month went on a job that made good money, a job that lost money, or whether half of them are still sitting in the van. This is where a purchase order system trades business needs, and most do not have one.
Here is the thing: once you know exactly which materials cost belongs to which job, everything changes. Your pricing gets real. Your profit margins stop being a guess. Your cash flow stops being a surprise.
What you will get from reading this: A clear understanding of why a purchase order system matters, what it tracks, how to set one up, and how it stops your business from slowly leaking cash through the materials hole most trades owners do not even know is there.
Why Does Your Trades Business Need a Purchase Order System?
Most plumbers, electricians, and builders I know manage materials the way they manage paperwork: in a reactive panic. A job comes in. You order what you think you will need. The supplier sends it. You use some. You use some on another job. You use some next week. And suddenly, you cannot tell if that 800 pounds of materials you spent was on the customer’s job or came out of your margin as waste.
The real problem is not that materials cost money. The real problem is that when you do not track them properly, they cost you twice: once when you pay for them, and again when you cannot tell whether that job actually made money or lost it.
Consider this. If you do not know what materials went into a specific job, how can you know if your quote was accurate? If your next quote is based on last week’s, but last week’s profit was eaten by untracked materials, then your quote is wrong. You quote again. Same materials leak. Same broken margins. You are building a system that guarantees failure, and you do not even know it.
A purchase order system trades business cannot run properly without is simply a way to create a clear paper trail (or digital trail) from the moment you order something to the moment it gets used. It is an agreement with your supplier. It is a record of what was actually ordered. It is proof of what arrived. It is the link between the cost and the customer.
Once you have that link, everything becomes visible.
What Should You Track in Your Purchase Order System?
A purchase order does not need to be complicated. In fact, it works better when it is simple. Here are the things every purchase order in a trades business should include:
- A unique reference number (so you can find this exact order again if you need to)
- The date you raised it
- The supplier’s name and details
- The exact items you are ordering, with part numbers if you have them
- The quantity
- The unit cost
- The total (excluding VAT)
- Who in your team authorised it (this matters for accountability)
- The date you need it by
- The customer or job code it belongs to
That last one is the key. The job code. That is what turns a purchase order from paperwork into a management tool.
Once goods arrive, they should be checked against what you ordered. If something is missing or damaged, you have the original purchase order to prove what you ordered and what should have arrived. If you need to return it, the purchase order is the document that lets you do that cleanly, with a credit note from the supplier.
The System in Action
Let me explain how this works in the real world. One of our client businesses is a heating engineer. They stock certain parts. They also buy materials specially for certain jobs. Before they had a purchase order system, they would order boiler controls, mixing valves, pipework, and everything would go into a parts cupboard or the van. When a job needed something, they would grab it. When they invoiced the customer, they would guess at materials cost based on what they thought they used. Sometimes they were right. Usually they were not.
After they set up a purchase order system and linked it to their job codes, something changed. They realised one particular product line was consistently costing more than they were charging for it. When they looked at the purchase orders, they could see exactly why. They were buying a particular type of valve, and their supplier had recently increased the price, but they had not updated their material lists for quotes. So for three months they had been pricing jobs with old material costs and losing money on every installation.
The purchase order system made that visible in weeks, not years.
What a Purchase Order System Actually Does for Your Cash Flow
Beyond tracking where materials go, a purchase order system does other things that matter. It tells you when you have paid a supplier for goods, but those goods have not yet been used on jobs or sold to customers. That is tied-up cash. Once you can see it clearly, you can make better decisions about stock levels. You can see if you are holding too much inventory. You can see if certain suppliers are slow to deliver, so you need to order earlier next time.
Most importantly, it stops the guessing game.
Here is what typically happens without a system. You are a plumber. You have bought 12 radiators for a stock purchase three weeks ago. You have used seven on jobs. You have one sitting in your garage from a cancelled job. You have four sitting in your van. On your next job quote, you tell the customer radiator costs 145 pounds each, because that is what you vaguely remember paying. But the supplier has a sale on this week, and if you had checked, you would have bought them at 128 pounds instead. You have just left 17 pounds on the table. Do that on 20 jobs a month and you have left 340 pounds a month on the table. That is 4,080 pounds a year of profit you did not even notice you were missing.
With a purchase order system, you would see the actual cost. You would know what you have in stock and what you paid for it. You would price correctly. That 17 pounds stays in your pocket.
How to Start: A Simple Three-Step Approach
You do not need expensive software. Your accounting software or CRM probably has a purchase order function already built in that you have never used. Start there.
First step: define who in your team is allowed to raise a purchase order and up to what value. If you are a sole trader, that is you. If you have an office team member, maybe they have authority up to 200 pounds and anything higher needs your approval. This is about control and accountability.
Second step: create a simple template. Your PO number. Date. Supplier. Items. Cost. Job code. Required delivery date. That is it.
Third step: make it a habit. Every single material purchase goes through the system. Every. Single. One. If you skip this for the “quick order” or the “it is only a small one”, you have broken the system. Disciplines are easy to break and hard to rebuild.
After you do this for a month, you will see patterns. After you do it for three months, you will see exactly which jobs are profitable and which ones are a problem. After six months, you will be quoting properly for the first time.
The Real Payoff
Let me be honest with you. Setting up a purchase order system is not the exciting part of running a trades business. It is not the bit you got into the job for. But I will tell you what happens when you do it properly.
You stop being surprised by your profit margin. You stop feeling like you are busy but broke. You know which jobs are actually worth doing. You can turn down the ones that look like they will lose money. You can price the good ones to stay good.
That is not just better admin. That is running a proper business.
Most trades owners I speak to have never done this. They assume they know where their money goes. They assume their quotes are based on real costs. They assume they are not wasting money on materials that never get used.
Then they look at the numbers, properly, and realise they have been losing a few quid on almost every job without even knowing it.
A purchase order system trades business cannot function well without is not complicated to set up. It is just a decision to be systematic about the one thing that bleeds cash in every trades business: materials.
Make that decision. Track the order. Link it to the job. Check the delivery. Match it to the invoice. Pay the invoice. Then look at your profit. It will be bigger than you thought.
If you want the full framework for operations, capacity planning, supplier management, and the templates and flowcharts to make this work properly, it is all in “The Systems Handbook”. You can find it on Amazon at https://amzn.to/45aMvUH. We also sell a copy from the office if you want to support us directly.
But whether you use our book or not, start the purchase order system now. Your bank balance will thank you.
If you want to talk through how this works for your specific business, drop me an email at info@togetherwecount.co.uk or connect with me on LinkedIn at https://linkedin.com/in/aaron-mcleish.
Aaron McLeish, Managing Director.
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