The PO Problem: How to Balance Service with Expense Control

CRE has a purchase order problem.

POs are a standard function for managing finances in real estate. They serve as formal documentation for authorizing purchases, ensuring expenses are pre-approved and providing transparency for financial oversight. Using them helps to align decentralized activity with centralized goals and planning by establishing clear control mechanisms over expenses.

In an ideal world, a PO will: 

• Authorize purchases before services are delivered and funds are spent
• Ensure purchases align with budget approvals
• Offer a financial audit trail for regulatory and internal compliance

But we don’t live in an ideal world, and despite their advantages, POs can become restrictive in the hands-on reality of property management. At worst, POs can delay urgent purchases (like repair necessities). In the real world, they are inaccurately and/or retroactively created, making compliance difficult to measure. Further, they’ve become an administrative tool and burden rather than a cost control mechanism.

Owners want to ensure that their teams aren’t being bogged down by unnecessary paperwork that’s not even adequately helping them measure spend. Here’s how to find balance. 

Owners want to ensure that their teams aren’t being bogged down by unnecessary paperwork that’s not even adequately helping them measure spend. Here’s how to find balance. 

The Downsides of Purchase Orders

While POs were introduced to streamline procurement, they often introduce new challenges for teams, especially when it comes to handling urgent, time-sensitive purchases. While it may appear on the surface that this is ensuring purchasing compliance among on-the-ground teams, the reality is that POs introduce more problems than they are solving if they’re not being used correctly and strategically. 

When teams require stringent PO compliance with no flexibility, they introduce a myriad of problems. Blanket PO policies are: 

• Time consuming: Initiating and approving a PO often involves multiple stakeholders and can slow down urgent purchases. 
• Labor intensive: Manually handling POs for small expenses adds to an already heavy administrative burden for property teams. 
• Detrimental to resident experience: Delays in minor but essential repairs (e.g., broken fixtures, landscaping issues) can negatively impact residents’ quality of life and satisfaction, which ultimately damages a property’s reputation. 

And this isn’t even to mention the fact that they are not always accurate. Again, in an ideal world, POs would be filled out and approved before a purchase is made. But doing so leads to significant delays in the ability to obtain necessary tools. Because of this, many teams end up retroactively creating POs after a purchase is made, eliminating the oversight for which POs were initially created to ensure. 

When rigid PO compliance is expected, it creates an atmosphere where teams are forced to either comply and risk hurting tenant experience, or “fudge” their POs to create the illusion of compliance where it does not exist. Either way, teams are not avoiding the time consuming, manual effort associated with coding POs–they’re just changing where in the process that time drain occurs. 

Both of these scenarios are bad for owners and operators.

Balancing Control and Flexibility in Property Management

To successfully manage properties, balancing the strict financial control of POs with operational flexibility is crucial. Properties must be able to act quickly on urgent needs, which means companies need to decide which expenses require a PO and which can be approved on the spot.

When to Control Spending

• High-Value Purchases: For large-scale upgrades or expensive equipment, POs ensure budget oversight and accountability.
• Scheduled Maintenance: When planning for seasonal or routine maintenance, POs provide a structured, predictable approval process.
• Vendor Agreements: For long-term contracts with third-party vendors, using POs can maintain consistency in cost and service level.

When to Be Flexible

• Small, Everyday Repairs: Minor issues, like fixing a faucet or replacing light bulbs, often do not require corporate-level oversight.
• Emergencies: During urgent repairs (e.g., broken HVAC during extreme weather), waiting for a PO approval isn’t practical and could harm resident experience.
• Unplanned Expenses: Low-cost, immediate needs that are critical to resident satisfaction may benefit from direct, on-the-spot approval.

Establishing a clear, tiered policy with “low” and “high” importance categories empowers managers to make timely decisions while still maintaining financial responsibility. The success of this method depends on strict adherence and the clear communication of expectations. 

Building a Hybrid PO Policy That Works

• Set a Spending Threshold: Define a dollar amount below which POs are not required. For example, allow purchases under $200 to bypass the PO process while still documenting the expense.
• Enforce Strict Rules for High-Value Items: Ensure all large purchases or vendor contracts are approved via PO to prevent unauthorized high-dollar spending. Enforce this strictly among your properties. 
• Use Work Orders for Internal Needs: For smaller, operational expenses managed internally, work orders can be a useful tool, reserving POs for larger, external vendor transactions.
• Review and Adjust: Reassess the spending threshold and adjust based on property needs, budget, and seasonal demands.

It’s important to realize that ensuring PO compliance means reducing the number of POs teams need to submit. When you allow for flexibility within a certain price range, but strictly enforce the PO policy above that range, compliance will increase. 

With a clear hybrid policy, property teams can act with autonomy on low-cost needs while protecting the bottom line through structured approval for major purchases.

PO Flexibility Builds Financial Success 

The topic of PO policies is inherently complex (and even a little controversial) in CRE. While POs provide critical financial control, they can be burdensome in a field that requires immediate responsiveness. A hybrid policy allows companies to retain the benefits of POs for high-value purchases while offering the flexibility to make quick, essential purchases without a bunch of red tape. Recognizing and addressing the limitations of traditional PO practices can lead to more realistic compliance, greater efficiency, and ultimately, a better balance between financial oversight and operational agility.

By blending financial rigor with the flexibility to support on-the-spot purchasing, property management teams can uphold property standards without compromising on cost control.