How purchase orders affect a project’s budget

A purchase order records a supplier commitment against a project. Approving it reserves budget before the supplier’s invoice becomes an approved cost.

Adding $6,000 of lines to a draft PO does not consume the project budget. Approval is the point at which Drum includes that PO commitment in the project’s budget picture.

An approved $6,000 PO commits $6,000 that is no longer available for other project work. Drum shows purchase order commitments alongside the project’s actual costs so you can see spending already incurred and supplier work still to be claimed.

When a linked supplier cost is approved, it contributes to cost to date and reduces the remaining PO commitment. The same allocated amount therefore moves from outstanding commitment into actual cost.

For example, ignoring other project costs and using amounts excluding tax:

Within this example, the combined supplier exposure remains $6,000. Approving the allocated invoice does not add another $3,000 on top of the original commitment.

Each PO line has its own available amount. The example order contains lines of $2,000, $3,000 and $1,000. A $1,000 cost against each leaves $1,000, $2,000 and $0 respectively. The Consumed and PO remaining columns help show where the order has been drawn down.

Simply importing an invoice does not establish the correct allocation. Linking and mapping connect the supplier’s invoice to the commitment it fulfils. Amounts beyond a PO line’s available balance are not assumed to be covered by that line.

Drawn shows the amount drawn against the PO; Remaining shows what is still available. The PO also shows Pending for draft costs and Billed for amounts on-charged to the client. Billed is a different measure from the supplier commitment.

Approval in Drum determines this budget behaviour. Creating a corresponding purchase order or bill in Xero is a separate integration action. A PO and its supplier bills have separate finance-system statuses.