Electrical
Accounts payable and supplier management field guide for electrical contractors
Control what you buy, from whom, at what price and terms, and pay it right, so the margin you estimated does not leak at the counter through price creep, double pays, and missed discounts.
Direct answer
Accounts payable and supplier management is controlling what you buy, from whom, at what price and terms, and paying it right. The margin you estimated leaks on the buy side through price creep, double-paid invoices, and missed discounts. The defenses are a purchase order on every real buy, a three-way match before you pay, and taking the early-payment discount.
Key takeaways
- The three buy-side defenses are a purchase order on every real buy, a three-way match before paying, and taking the early-payment discount.
- No PO, no pay: an invoice arriving with no purchase order behind it gets held until someone accounts for the buy and price.
- A three-way match checks the PO, receiving record, and invoice agree on item, quantity, and price before payment; any mismatch is held.
- 2/10 net 30 means 2 percent off if paid within 10 days; taking it works out to roughly 36 percent annualized.
- Restocking fees on returns commonly run 15 to 25 percent, returns windows are often around 30 days, and special-order items often cannot be returned.
What accounts payable and supplier management is
Accounts payable is the money you owe your suppliers, and supplier management is how you control what you buy, from whom, at what price and terms, and how you pay it. Put together, it is the buy side of the business: every panel, every spool of wire, every gear order, every counter run on the account, and the invoices and statements that follow them. Labor you manage with a clock. This is everything that comes off a supplier.
Most shops think the margin is made at the bid and protected in the field. Half of it is. The other half is protected at the counter and at the desk where the invoices get paid. You can bid a job tight, run it clean, and still bleed points because the wire came in at a price nobody checked, an invoice got paid twice, and the 2 percent discount on a forty-thousand-dollar gear order went uncollected because the check went out on day 25 instead of day 10.
This guide is the buy side. It sits next to two others. The expense and receipt guide covers catching the counter receipt so the cost is not lost in the truck. The job costing guide covers what you do with the cost once it lands. This one is about what happens between the order and the paid invoice, where the price and the payment are decided.
The margin leaks on the buy side
The buy side leaks in three directions, and a shop usually only watches one of them.
Margin is the first. You estimated the wire at the price the supplier quoted at takeoff. By the time the job buys it, the price has crept, the quote expired, or the counter rang it up at book price instead of your contract price, and nobody compared. A few points here, a few there, and the job that bid at 30 percent gross closes at 24, with no single line big enough to notice.
Cash is the second. Terms and discounts are real money. Net 30 is a thirty-day interest-free loan from your supplier, and a 2/10 discount is a return north of 30 percent annualized if you take it. Pay early when there is no discount and you gave away free float. Pay late when there was a discount and you left the best return in the business on the table.
Errors are the third, and they are the quiet one. Suppliers bill the wrong price, bill for material that backordered, and send the same invoice twice. Pay those without checking and the money is gone, because a supplier who got paid twice is not always the one who calls to tell you. Industry estimates put duplicate and erroneous payments at a small fraction of invoices, but on six-figure annual purchasing that fraction is real cash. The whole point of this guide is to plug all three on the buy side before they reach the bottom line.
Why use purchase orders?
A purchase order authorizes the spend before the money goes out, names what is being bought and the agreed price, and ties the buy to a job. That is the control. Without it, anyone with a truck and your account number can spend your money at book price, and you find out when the invoice lands. With it, the spend is approved, priced, and traceable from the moment it is placed.
The rule that makes a PO system work is blunt: no PO, no pay. An invoice that arrives with no purchase order behind it gets held, not paid, until someone accounts for why the buy happened and at what price. Shops that pay every invoice that looks legitimate are training their suppliers and their own crews that authorization is optional, and uncontrolled buying is exactly how the estimate gets beat.
Scale the PO to the dollars. A formal PO on every roll of tape is a system the field abandons in a week, so reserve it for the buys that move the number: gear packages, switchgear, large wire and conduit orders, fixture packages, anything you negotiated a price on. The small counter runs are handled as expenses, captured at the counter and coded to the job, which the expense and receipt guide covers in full. The PO is for the buy big enough that the price and the authorization are worth pinning down.
This is where a field tool pays for itself. With FieldOS the purchase order is issued against the job from the field, carries the agreed price, and stays attached to that job through receiving and the invoice, so the buy is controlled and coded from the first step instead of reconstructed from a pile of invoices at month end.
What is a three-way match?
A three-way match checks three documents against each other before you pay: the purchase order, the receiving record, and the supplier invoice. The PO says what you ordered and the price you agreed to. The receiving record says what actually showed up and in what condition. The invoice says what the supplier wants to be paid. When all three agree on the item, the quantity, and the price, you pay. When any one disagrees, the invoice gets held until the gap is explained.
This is the single best defense against paying for something you did not get or did not agree to. The overcharge is the common one: the invoice rings the wire at a higher price than the PO locked in, and without the PO to check against, it gets paid because it looks like every other invoice. The short ship is the next one: you ordered ten reels, six showed and four backordered, and the invoice bills all ten. The third is the phantom: material billed that never arrived at all. The match catches all three before the money moves, which is the only time catching them is cheap.
You do not need a corporate AP department to run a three-way match. The foreman who checks the delivery against the packing slip and the PO, and the office that matches the invoice to both before cutting the check, are running it by hand. The discipline is what matters. A match done late, after the check cleared, is just a record of money you already lost.
Receiving: check the material in against the PO
Receiving is where the three-way match lives or dies, because the receiving record is the one document the supplier does not write. If nobody counts and conditions the material when it lands, you have only the supplier's word for what arrived, and the supplier's word is the invoice you are trying to verify.
Count it and condition it at delivery. Count the reels, the boxes, the lengths of strut, against the packing slip and the PO, and note what is short or backordered right then. Look at the condition while the driver is still there: the damaged reel, the wrong catalog number, the gear that arrived with a dented enclosure. A short or a damage claim made at the dock is a credit. The same claim made three weeks later, after the material is scattered across the site, is an argument you usually lose.
The field tell that costs the most is the signed-clean delivery nobody checked. A foreman signs the slip to get the driver moving, the count was never made, and four reels short becomes four reels paid for. Tie the receiving back to the PO on the job, note the short, and the office has what it needs to hold the invoice for the part that never came.
Supplier pricing: job quotes, volume, and rebate
Supplier pricing is not one number, and treating it as one is how shops overpay. There is the book price the counter rings up by default, your standing contract price as an account holder, the job-specific quote you negotiate for a particular package, and the rebate or volume program that pays back at the end of the period. The gap between book price and your real price is wide on electrical material, and it is yours to capture or leave on the table.
Negotiate the big packages job by job. When a job has a real gear or wire spend, take the takeoff to two or three suppliers and get a written, dated quote, then hold the winner to it through receiving and the invoice. The quote is a price for a window, often 30 days, and it expires, so the buy has to land inside the window or the price moves. On the steady consumables, your contract pricing and category discounts are the lever, and they are worth reviewing yearly because they drift.
Rebates and volume programs are real margin if you actually track the spend that earns them. A program that pays back a percentage at a volume tier is money you already earned by buying; the only way to lose it is to not measure your buying against the tier and to not claim it. The watch item across all of it is price creep, which gets its own section because it is the leak that hides best.
Why is my invoice higher than the quote?
An invoice that comes in higher than the quote is the most common buy-side leak, and the cause is almost always one of a short list. The quote expired and the buy landed at the new, higher price. The counter rang it at book price because nobody flagged the account contract price. A material escalation hit between the quote and the order and nobody re-priced the bid. Or the line was simply keyed wrong on the supplier's end, which happens more than suppliers admit.
The fix is verification, and it only works if you kept the quote. Match the invoice price line by line against the PO and the original quote before you pay. When the invoice beats the quote, that is a credit you call for, not a cost you eat, and a supplier who values the account will issue it without a fight. The shop that never compares is the shop that trains its suppliers to let the price drift up, because nothing pushes back.
Price creep is dangerous because no single instance is big enough to trigger anybody. Two percent here on a wire order, a dollar there on a fitting, a quote that quietly expired. It does not show up as a line item. It shows up as a job that came in a few points under the bid, with no obvious reason, over and over. The defense is comparing every meaningful invoice against the price you were quoted, every time.
What is 2/10 net 30?
2/10 net 30 means you take 2 percent off the invoice if you pay within 10 days, and otherwise the full amount is due in 30. Net 30 on its own means the full amount is due in 30 days with no discount. Those are the two terms you will see most from electrical suppliers, along with net 60 on larger accounts and COD when the account is new.
Take the discount. The 2 percent looks small until you annualize it. By paying 20 days early to save 2 percent, you are earning a return that works out to roughly 36 percent on an annual basis, because you are capturing 2 percent over a 20-day window about eighteen times a year. There is no investment in the business that reliably returns 36 percent. If you have the cash, paying inside the discount window is the highest-return use of it you have, and a shop that routinely misses 2/10 discounts is leaving its best return uncollected.
Where it is a judgment call is cash. The discount only pays if taking it does not force you to borrow at a higher rate or starve payroll. If money is tight, net 30 is an interest-free thirty-day loan from the supplier and you should use the full term. The mistake on the other side is just as real: paying a net 30 invoice on day 5 when there is no discount gives away free float for nothing. Match the payment timing to the terms, and confirm the cash position before you commit, because the right answer moves with the bank balance.
| Terms | What it means | Play |
|---|---|---|
| Net 30 | Full amount due in 30 days, no discount | Use the full 30 days, free float |
| 2/10 net 30 | 2 percent off if paid in 10 days | Take the discount if cash allows, ~36% annualized |
| Net 60 | Full amount due in 60 days | Common on larger accounts, use the term |
| COD | Pay on delivery, no account credit | Typical for a new supplier until credit is set |
Reconcile the monthly statement to the invoices
Every supply house sends a monthly statement listing every charge on your account for the period. Reconcile it against the invoices and POs you already have. Match each line on the statement to a captured invoice tied to a job, and you catch two kinds of problem at once: the supplier's errors and your own gaps.
The supplier errors are the duplicate charge, the buy that belongs to another contractor and landed on your account, the return that was credited on paper but never on the statement, the finance charge added because an invoice was disputed. The statement is where those surface, because the supplier never forgets to bill but does not always remember to credit. Your own gaps are the counter runs that hit the account and never made it into your records, which is the lost-receipt problem the expense guide covers, reappearing here because the supplier remembers what your shoebox forgot.
Run the account unreconciled too long and it becomes a slush fund nobody can tie to work. Wrong charges live there undisturbed, finance charges pile up on disputed lines, and your own missed costs quietly turn into overhead. Reconcile monthly, while the people who made the buys can still remember them, and the statement is a control instead of a mystery.
How do you avoid paying an invoice twice?
You avoid double-paying by recording the supplier's invoice number and refusing to pay the same number twice. That one control catches most of it. Suppliers send the same invoice by mail and by email, send a statement that looks like a fresh bill, and re-send an invoice that was already paid because their own system did not mark it. Pay by what is in front of you instead of by the invoice number, and you pay the same charge twice.
Layer a few more controls on top. Match every payment to a PO and a receiving record, so a duplicate with no new PO behind it has nothing to match and gets held. Separate the person who enters the invoice from the person who approves the payment, so two sets of eyes touch every check. Watch for the same amount to the same supplier on the same date, which is the signature of a duplicate even when the invoice number was changed. And keep one clean record per supplier instead of three near-duplicates, because a vendor entered three ways is three places a duplicate can hide.
The reason this matters more than it sounds is that the money does not come back on its own. A supplier paid twice may credit you when you catch it, but you have to catch it, and the credit is only as good as the reconciliation that finds it. The control that stops the second payment before it leaves is worth more than the dispute that chases it after.
Approval workflow and spending limits
Someone other than the buyer should approve an invoice before it is paid, and who can authorize what should be set by a dollar limit, not by who happens to be standing there. The approval step is where the wrong price, the duplicate, the unauthorized buy, and the personal charge get caught before the check is cut, and it is the cheapest control in the building because it costs only attention.
Set the limits to match the trust and the dollars. A foreman can release small buys against an open job. A PM signs off up to a project threshold. The owner or controller approves the large gear orders and anything that crosses a set ceiling. The point is not bureaucracy. It is that the person approving has the budget and the contract in front of them, sees the spend before it ships, and is not the same person who placed it. Self-approval is how uncontrolled buying becomes invisible.
Keep it light enough that it actually happens. An approval chain with five steps gets bypassed under deadline, and a bypassed control is worse than none because the record says it was approved. Two real checkpoints, the match and the approval, applied every time, beat an elaborate workflow that the field routes around.
Code every PO and invoice to the job
A purchase order and its invoice are not just an AP record. They are job cost the moment they are coded to a job and a cost code. The PO for the gear package lands on the service line of that job. The wire order lands on rough-in. Coded that way, the buy feeds the estimate-versus-actual picture directly, and the material side of the job cost is true because it carried its job from the order, not from a guess at month end.
Leave the PO and invoice uncoded and the cost floats. Someone in the office guesses which job a large order belonged to, gets it wrong often enough that the job cost is fiction, and the estimate-versus-actual comparison that the job costing guide is built around stands on bad data. The discipline is the same one that runs through every cost on the job: no buy without a job attached. A PO coded to the job at issue is a buy that costs itself.
This is the second place a field tool earns its keep. With FieldOS the PO is issued against the job, the receiving and the invoice stay attached to it, and the coded cost flows to the job cost without anyone re-keying it, so the material number on the job is the same number the buy actually was. The job costing guide covers what you do with that number once it lands; the point here is that coding it at the buy is what makes it trustworthy later.
Counter buys and PO buys both land on the job
Not every buy gets a purchase order, and that is fine, as long as both kinds of buy reach the job. The big, negotiated orders run through a PO with a three-way match. The small counter runs, the breaker and the roll of tape and the fitting nobody planned, run as captured expenses, photographed at the counter and coded to the job. Two paths, one destination: every cost on the right job.
The split matters because forcing a PO onto every counter run kills the PO system, and letting counter runs skip capture kills the job cost. A shop that only tracks PO buys is missing all the small money that walks out the supply house door on the account every day, and that small money adds up to real points across a year. The expense and receipt guide is the companion to this one for exactly that reason: it covers catching the counter buy at the moment of purchase so it is not lost in the truck.
Where the two guides meet is the supplier account. A counter buy on the account and a PO buy on the account both show up on the same monthly statement, and both have to reconcile to a captured record tied to a job. The PO buy is verified by the three-way match. The counter buy is verified by the receipt photographed at the counter. The statement is where you confirm both made it home.
The supplier relationship is worth managing
A good supplier relationship is a real asset, and it is built mostly on one thing: paying on time. The supply house knows exactly which contractors pay on terms and which ones stretch to 60 and dispute every charge, and they price and serve accordingly. The shop that pays clean gets the better price, the call back when material is short, and the benefit of the doubt on a return. The shop that pays slow gets book price and a wait.
The service that comes with a good relationship is worth money on the job. A credit line that floats your material between buy and bill. Priority when stock is tight and everybody needs the same gear. Will-call held and pulled so the truck is in and out. Delivery to the site so a man is not off the job running for parts. Tech support from a counter person who actually knows the product. None of that is on the invoice, and all of it shows up in the labor hours and the schedule.
Treat the relationship as a two-way account. Pay on time, give them lead time on big orders instead of emergencies, and concentrate enough volume to matter. The supplier who counts on your business is the one who answers the phone at 6 a.m. when the gear is wrong and the inspection is at 9. That favor is earned on every invoice you pay on terms.
Supplier credit lines, guarantees, and COD
A supplier credit line lets you buy on account and pay on terms instead of cash at the counter, and it is the financing that makes a trade business run, because it floats your material between the buy and the day the customer pays. To get it, you fill out a credit application, and on a young or small company the supplier usually wants a personal guarantee, which means the owner is personally on the hook for the account if the company does not pay.
Read what you sign. A personal guarantee is exactly what it sounds like, and it survives the company, so know what you are signing before the owner's house is behind a wire account. Some suppliers also take a security interest or file to protect the account. These are normal terms, but they are terms, and whether they are reasonable for your situation is a question for your attorney and your accountant, not for the counter.
When the account is new, expect COD until the credit is established, which usually means cash or card on delivery for the first stretch while the supplier builds confidence in your payment. That is not an insult, it is how credit gets earned. Pay clean through the COD period and the account opens, the limit grows, and the terms improve. The credit line you want in year three is built by how you pay in year one.
Return the unused material, mind the restocking fee
Material you overbought is money sitting on a shelf, and on most jobs there is more of it than anyone admits. The reel that was almost used up, the box of fittings the count was wrong on, the gear that got value-engineered out after it was ordered. Return what is unused and in returnable condition, and get the credit, because the alternative is eating the overbuy and watching it gather dust in the shop until it is obsolete.
Two things gate the return: the window and the restocking fee. Suppliers take returns for a limited period, often 30 days, and stock that sits past the window is yours to keep. Many also charge a restocking fee on returned material, commonly somewhere in the range of 15 to 25 percent, and special-order or cut items frequently cannot be returned at all. Confirm the actual window and fee with your supplier, because they vary by house and by account.
The discipline is to handle the return while it still qualifies. Flag the overbuy at job closeout, get it back to the supplier inside the window, and confirm the credit lands on the statement, because a return promised at the counter and never credited is a return you did not get. The restocking fee stings, but eating the full cost of material you never installed stings more.
Can a supplier put a lien on the job?
Yes. A material supplier who sells to you and does not get paid can generally file a lien against the property where the material went, the same way a subcontractor can, because the supplier furnished material that improved the owner's property. That is the materialman's or mechanics lien, and it means your unpaid supplier bill can become the owner's problem and, fast, your problem, because nothing sours a relationship with a GC or owner like a lien on their project that traces back to you not paying for your wire.
The practical exposure is real on larger jobs where you buy a big gear package on credit. If you bill and collect from the owner but do not pay the supplier, the supplier can come after the property, and the owner can end up paying twice or holding your payment until you prove the suppliers are paid. That is why lien waivers and, on some jobs, joint checks exist: the owner or GC protects themselves by confirming the people below you got paid.
The specifics are entirely state law and they vary a lot: who has lien rights, the notice a supplier has to send to preserve them, the deadlines, the dollar thresholds, and whether your state caps recovery at the unpaid contract balance or not. This guide is not legal advice. Pay your suppliers on the jobs you have been paid for, keep your lien waivers straight, and take the actual rules and deadlines for your state to a construction attorney.
Accounts payable in the system, not a pile of invoices
Accounts payable breaks down at the seams. The PO lives in one place, the receiving record in another, the invoice in a third, and the payment in a fourth, and every seam is where a price goes unchecked, a match gets skipped, or an invoice gets paid twice. The shop running AP as a pile of paper invoices on a desk, paid in the order they surface, is not controlling the buy side. It is hoping the suppliers are honest and the prices are right.
The version that works runs the cycle as one flow: PO, match, approve, pay, with each step tied to the job and to the steps around it. The invoice cannot be approved until it matches a PO and a receiving record. The payment cannot go out until it is approved by someone other than the buyer. The same invoice number cannot be paid twice. The discount window is flagged before it closes. Each of those is a control, and controls only hold when the system enforces them instead of relying on someone to remember.
FieldOS handles the field side of that flow: the PO is issued against the job, the delivery is received against the PO, and the coded record hands the office a clean match to approve and pay, so the buy is controlled and costed from the order instead of reassembled from paper later. Pair the field capture with your accounting package for the payment and the books, and set the approval limits and the chart of accounts with your bookkeeper so the job cost and the general ledger tell the same story.
The numbers that prove the buy side is working
A few numbers tell you whether your AP and supplier controls are actually working, and all of them are money you can see only if you measure them.
Discounts captured is the first: the share of available early-payment discounts you actually took. A 2/10 discount missed is roughly 36 percent annualized left on the table, so a low capture rate is a direct, measurable loss. Price variance is the second: the dollar gap between what you were quoted and what you were invoiced, totaled across the period. It is the size of your price creep, and you cannot fight what you do not measure. Double pays caught is the third: the count and dollar value of duplicate or wrong invoices your controls stopped before payment, which is the proof the three-way match and the duplicate control are earning their keep.
Track these monthly, not at year end, because the point is to change behavior while there is still behavior to change. A discount capture rate you see once a year changed nothing. FieldOS keeps the PO, the match, and the coded cost on the job, which is the raw data these numbers come from, so discounts available versus taken and quote versus invoice are measurable instead of guessed. The contractor who watches discount capture and price variance is running a different, tighter buy side than the one who only knows the bank balance.
| Metric | What it tells you | Bad sign |
|---|---|---|
| Discounts captured (%) | Share of early-pay discounts taken | Low rate, leaving ~36% annualized on the table |
| Price variance ($) | Gap between quoted and invoiced price | Grows over time, price creep unchecked |
| Double pays caught | Duplicates stopped before payment | Zero caught usually means none looked for |
| Days payable outstanding | How long you take to pay | So slow that service and pricing suffer |
Commercial work: blanket POs and releases
On larger and longer commercial jobs the single PO gives way to the blanket PO. A blanket purchase order sets an agreed price and terms for a category of material over the life of the job, and then individual releases pull against it as the work needs the material. You negotiate the wire price once for the whole project, then release reels against the blanket as each phase reaches for them, instead of re-pricing every buy.
The control comes from the releases. Each release is tracked against the blanket so the total drawn does not exceed what was authorized, and each release codes to the phase or the job cost code it serves. Run it loose and a blanket PO becomes the uncontrolled buy it was meant to prevent, with material flowing against an open price and nobody watching the running total. Run it tight and you get the negotiated price plus the control, which is the whole reason the structure exists.
The match still applies. Each release gets received and each invoice gets matched against the release and the receiving record before payment, the same three-way match as a standalone PO. The blanket sets the price; the release and the match keep each draw honest against it.
Where the buy side breaks down
The buy side fails in a handful of predictable ways, and they share a root: a control that was supposed to run before the money moved did not.
No PO is the first, so the buy is uncontrolled and the price and authorization are whatever the counter rang. No three-way match is the second, so overcharges and short ships get paid because nothing checked the invoice against what was ordered and received. The missed discount is the third, the 2 percent left uncollected because the check went out on day 25. The double pay is the fourth, the same invoice paid twice because nobody tracked the invoice number. Price creep unchecked is the fifth, the slow drift between quote and invoice that no single line is big enough to trigger anyone. And paying late is the sixth, which costs you the service, the pricing, and on a bad enough stretch a supplier lien on the owner's job.
Every one of these happens before or at payment, not in the accounting after. That is the lesson: the fix is upstream, at the PO, the match, and the timing of the check, where the price and the payment are actually decided.
What to document
Each control on the buy side leaves a record, and the record is what lets you defend the price you paid and prove the controls ran. Miss the record and the control may as well not have happened, because there is nothing to check against later.
| AP control | Why it matters | Note to keep |
|---|---|---|
| Purchase order | Authorizes and prices the buy against a job | PO number, agreed price, supplier, job |
| Quote | The price to hold the supplier to | Quoted price, date, expiration window |
| Receiving record | Proof of what arrived and its condition | Quantity received, shorts, damage, date |
| Three-way match | Catches overcharge, short ship, phantom | Match result, any held lines |
| Invoice number | Stops the same invoice being paid twice | Number recorded, paid-once flag |
| Approval | Someone other than the buyer signed off | Approver, dollar limit applied |
| Payment terms | Whether the discount was available | Terms, discount window, date paid |
| Statement reconciliation | Catches supplier errors and your gaps | Period, lines matched, disputes opened |
Common mistakes
- Buying with no PO, so the spend is uncontrolled and the price is whatever the counter rang.
- Skipping the three-way match, so overcharges and short ships slip through and get paid.
- Missing the 2/10 early-payment discount by paying on day 25 instead of day 10.
- Paying the same invoice twice because nobody tracked the invoice number.
- Letting price creep go unchecked because no single invoice is big enough to notice.
- Paying late and losing the service, the pricing, or triggering a supplier lien on the owner's job.
- Leaving the PO and invoice uncoded, so the material cost floats off the job.
- Never returning the overbuy, so unused material gathers dust past the return window.
Field checklist
Want this checklist to run itself on every job — with photo proof and a signed record crews can hand the customer? That's FieldOS.
Practice and references
Accounts payable and supplier management is an accounting and operations practice, not a code-driven one, so the references here are controls and agreements to set up with your books and your advisors, not enforceable electrical standards. The core AP controls, the purchase order, the three-way match of PO to receiving to invoice, and the duplicate-payment check, are standard accounts-payable practice, and your bookkeeper or controller sets how strict they run. Three of them carry most of the protection: no PO no pay, match before you pay, and take the early-payment discount.
The payment terms are commercial terms between you and the supplier, written on the invoice and in your account agreement. 2/10 net 30 and net 30 are the common ones, and the early-payment discount annualizes to a return well above 30 percent, which is why taking it is usually right when cash allows. Confirm your actual terms, discount windows, and return policies with each supplier, because they vary by house and by account.
Supplier credit terms, personal guarantees, and supplier lien rights have real legal weight, and they are governed by your contracts and by state law that varies widely. Who has lien rights, the notices and deadlines that preserve them, the dollar thresholds, and whether recovery is capped at the unpaid contract balance all turn on the state and the facts. Treat this guide as the operations framework, and take the credit agreements you sign and the lien rules for your state to your accountant and a construction attorney before they matter on a job.
Terms and definitions
Accounts payable carries its own vocabulary, and the same idea shows up under different names across a supplier statement, an accounting package, and a contract.
Knowing the terms keeps the conversation with your supplier, your bookkeeper, and your banker honest, because these words have precise meanings that a rough paraphrase gets wrong.
- Accounts payable (AP)
- The money you owe suppliers for material and services bought on account, not yet paid
- Purchase order (PO)
- A document authorizing a buy against a job, naming the items, the agreed price, and a tracking number
- Three-way match
- Checking the PO, the receiving record, and the invoice against each other before paying
- 2/10 net 30
- Pay terms: 2 percent off if paid within 10 days, otherwise the full amount due in 30
- Net 30 / net 60
- Full amount due in 30 or 60 days, an interest-free loan from the supplier for that term
- Blanket PO / release
- A standing PO at an agreed price for a project, drawn down by individual releases as needed
- Materialman's lien
- A supplier's claim against the property where unpaid material was furnished, governed by state law
- Days payable outstanding
- The average number of days you take to pay suppliers, a measure of how you use your terms
FAQ
What is a three-way match in accounts payable?
A three-way match checks the purchase order, the receiving record, and the supplier invoice against each other before payment, so the item, the quantity, and the price all agree. It catches overcharges, short ships, and material billed but never delivered. Any mismatch gets held instead of paid, which is the only time catching the error is cheap.
What is 2/10 net 30 and should I take the discount?
2/10 net 30 means 2 percent off if you pay within 10 days, otherwise the full amount is due in 30. Take it when cash allows. Paying 20 days early to save 2 percent works out to roughly 36 percent annualized, a return no investment reliably beats. If cash is tight, use the full net 30 term instead.
Why use purchase orders as a contractor?
A purchase order authorizes the spend before the money goes out, locks the agreed price, and ties the buy to a job. The rule is no PO, no pay: an invoice with no PO behind it gets held until someone accounts for the buy. Reserve POs for the big negotiated orders where the price and authorization are worth pinning down.
How do contractors manage suppliers?
Pay on time, concentrate volume, negotiate job pricing on the big packages, and reconcile the account monthly. Paying clean on terms earns the better price, priority when stock is tight, will-call and delivery, and the benefit of the doubt on returns. The supplier knows exactly who pays slow and prices and serves accordingly.
How do you stop paying an invoice twice?
Record every invoice number and refuse to pay the same one twice, since suppliers re-send invoices by mail and email and statements look like fresh bills. Match each payment to a PO, separate the person who enters invoices from the one who approves payment, and watch for the same amount to the same supplier on the same date.
Why is my supplier invoice higher than the quote?
Usually the quote expired, the counter rang book price instead of your contract price, a material escalation hit, or the line was keyed wrong. Match the invoice against the PO and the original quote line by line. An overcharge is a credit you call for, not a cost you eat, so keep the quote and compare every meaningful invoice.
Can a supplier put a lien on the job if I do not pay?
Generally yes. A material supplier who furnished material and was not paid can file a lien against the property, the same as a subcontractor, which makes your unpaid bill the owner's problem and fast yours. The rules, notices, deadlines, and thresholds are state law and vary widely. Take the specifics to a construction attorney.
Do I need a personal guarantee for a supplier credit line?
Often yes on a young or small company. The credit application usually asks the owner to personally guarantee the account, meaning you are on the hook if the company does not pay, and the guarantee survives the company. New accounts also start COD until credit is established. Read what you sign and confirm the terms with your attorney.
What is a blanket purchase order?
A blanket PO sets an agreed price and terms for a category of material over the life of a job, and individual releases pull against it as the work needs the material. You negotiate the price once, then draw releases by phase. Track the releases against the blanket so the total drawn does not exceed what was authorized.
Is there a restocking fee on returned material?
Often yes. Many suppliers charge a restocking fee on returns, commonly somewhere in the range of 15 to 25 percent, and special-order or cut items frequently cannot be returned at all. Returns also have a window, often around 30 days. Confirm the actual fee and window with your supplier, and return the overbuy before it gathers dust past the deadline.