One of the crucial steps in the procurement process is creating a purchase order or PO. Buyers should ensure that they prepare a PO for every purchase they make. A purchase order is a legal document that acts as a production agreement between buyers and sellers. Despite it being a legally binding document that authorizes the purchase of goods or services, many business organizations can find creating a PO a daunting task. Without a PO, buyers are vulnerable to unexpected delays and price changes, which can hurt their business.
The process of sourcing materials can be very complicated, and buyers often face issues such as supply shortages, miscommunication about items, payment issues, and unexpected delays. However, one can save themselves from these troubles by creating purchase orders. As discussed earlier, a purchase order is a legal document that authorizes a purchase between a buyer and supplier. Without a PO, it would be tricky to prove that something went wrong in a PO.
In a purchase order, buyers can specify which products they need, how much they need, and when they need them, and also have a record of the price at which the items are being bought. This makes the sourcing process smooth. How this helps suppliers is that they can cross-check the items while shipping them, so there are no errors. A PO reassures buyers that their orders are correctly fulfilled. Since much investment is involved, a PO acts as a financial document that a buyer can use to track expenses and form a budget for future orders.
|A PO is a record of what the buyer wants to buy.
|An invoice is a record of the goods supplied to the buyer.
|Purchase orders are meant to ask for the delivery of items.
|An invoice asks for payment of goods.
|A purchase order is created before the goods and services are delivered.
|An invoice is created after the goods and services are shipped.
A purchase order is an official legal agreement created in a standard format.
This includes details of the company placing the order. Include the business address, date of order, serial number of order, and the full name of the company.
This is the date on which PO is created and used for book keeping and accounting. It differs from the signature date, so buyers should include it in the file.
This part includes the name of the seller, their company's name and official address, and the contact number of the POC (point of contact) from their company.
This section includes details such as when and where the products need to be shipped and the preferred shipping method.
A buyer should ensure that every purchase detail is documented in the PO. The name of the item, its price, total quantity, and delivery date are some of the most important information that needs to be included in the order description.
In this section, the buyer should include the subtotal, taxes, shipping charges, and the grand total of the purchase.
Any brand planning to make a purchase can use the following samples as a reference to create their purchase order.
The order description column is important because it ensures clarity and no error.