Creative agency glossaryFinance and Billing

PO Number Tracking

PO number tracking is the practice of recording a client's purchase order number against every project, estimate and invoice so that work is authorized before it begins and paid without dispute when it ends.

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What is PO number tracking?

A purchase order, or PO, is the document a client's finance department issues to authorize spending with a supplier. It carries a number, a description of the work, an amount and the terms, and it is the client's internal promise that the money exists and the invoice will be paid. PO number tracking is the agency's side of that system: capturing the number when the work is approved, attaching it to the job, quoting it on every invoice and watching the amounts so that the invoices never exceed what the PO authorized.

For small clients a PO may not exist, and an email saying "go ahead" does the job. For large companies, especially the kind that hire agencies for brand work, a PO is mandatory: an invoice without a valid PO number is not rejected so much as never seen, because the accounts payable system cannot match it to anything.

Why it matters

Why PO number tracking matters

Getting paid is a process, and the PO is the key to it. Agencies that start work before a PO is raised are working on trust, and when the invoice arrives at a client's accounts payable department without a number to match, it joins a queue that can run for months. Tracking the PO from the start means the invoice is paid on the terms agreed rather than on the terms of whoever finds it last. For a studio with crews, freelancers and vendors to pay, that difference is cash flow, and cash flow is survival.

The PO also protects the scope. The amount on it is what the client has approved; if the work grows beyond it, the agency needs a new or amended PO before invoicing the difference, and the discipline of noticing that moment is what prevents the awkward conversation in which a client's finance team refuses an invoice their marketing team already agreed to.

In practice

How PO number tracking works in practice

  1. 01

    The process starts at approval. When the client accepts the estimate, the agency's producer or account manager requests a PO and does not open the job, or at least does not incur costs, until it arrives. The PO number, amount, date and any expiry or billing conditions are recorded against the project in the agency's finance or project management system, where everyone who will touch the invoice can see them.

  2. 02

    As the work proceeds, costs are tracked against the PO amount. If a change order increases the fee, the client is asked to raise an additional PO or amend the existing one before the extra work is invoiced. Partial invoices, such as a deposit and a balance, each quote the same PO number and together must not exceed it. When the job closes, the final invoice is checked against the PO before it is sent: number present, amount within authorization, description matching, terms as agreed.

  3. 03

    Many agencies keep a simple PO register: every open PO, its client, its amount, what has been invoiced against it and what remains. It takes minutes to maintain and it answers the question finance teams ask most often, which is "what is outstanding and why". It also makes month-end faster, because every invoice already carries the reference the client's system is going to ask for.

  4. 04

    The PO sits inside a client's wider payment process, and the agency has to be set up in it. Vendor registration, tax forms, banking verification and the client's invoice submission portal all come before the first invoice, since a perfect invoice from an unregistered supplier goes nowhere. POs also expire, often at the client's fiscal year end, and an unbilled balance can vanish with them, so the register carries each PO's close date and open balances are invoiced or re-authorized before it.

Watch out

What people get wrong about PO number tracking

Starting work without the PO. Marketing teams approve work in meetings and finance departments issue POs in their own time, and the gap between the two is where unpaid invoices are born. The second mistake is invoicing above the PO amount without an amendment, which guarantees a rejection no matter how justified the extra cost. The third is treating the PO as paperwork rather than as information. The PO tells the agency exactly what the client's finance team believes it has bought, and reading it carefully prevents most billing disputes before they begin.

Related terms

PO (Purchase Order)InvoicingBilling and InvoicingExpense Tracking

Questions

People also ask

What is a PO number on an invoice?

It is the purchase order number the client issued to authorize the work, quoted on the invoice so that the client's accounts payable system can match the invoice to an approved spend. Without it, many large companies cannot process the invoice at all.

What happens if an agency invoices without a PO number?

At small clients, usually nothing; the invoice is paid on the strength of the relationship. At large companies the invoice is typically rejected or stalled until a PO is raised retroactively, which can take weeks or months and depends on the goodwill of the marketing contact who approved the work.

Can an invoice exceed the PO amount?

Not without an amended or additional PO. If the scope grows, the agency should get the increase authorized before invoicing the difference. Invoicing above the PO is one of the most common causes of payment delays in agency work.

Who manages PO tracking at an agency?

Usually the producer or account manager captures the PO at approval and the finance or operations person tracks invoices against it. At small agencies it is the owner. Whoever does it, the rule is the same: no PO, no costs incurred, and no invoice without the number on it.

Next to it in the glossary

  1. P&L ReportA P&L report, or profit and loss statement, summarizes a business's revenue, costs and expenses over a period to show whether it made or lost money.
  2. Partial BillingPartial billing is invoicing a project in stages, at milestones or fixed intervals, instead of one bill at the end.
  3. Partial InvoiceA partial invoice is a bill for a portion of a project's total, issued when a phase or a milestone is complete rather than waiting for the whole job to finish.
  4. PO Purchase OrderA purchase order (PO) is a document a client issues to confirm what they are buying, from whom and for how much, and the reference every invoice on the job has to carry to get paid.
  5. Prepayment InvoiceA prepayment invoice is an invoice issued before any work is delivered, usually for a deposit or an advance on a project, so the agency is paid for costs it has to commit up front.
  6. Product Base MarginProduct base margin is the gap between what a product costs to make or buy and what it sells for, before discounts, marketing and overhead are counted.

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