The activity of any company is accompanied by an extensive workflow and paperwork. One of the necessary papers in the enterprise is the purchase order. It is usually issued to establish a deal between the customer and the external supplier. A customer puts a purchase order to buy products or services. It is an official form containing:
Now, you do not need to formulate a purchasing order manually. For instance, you can utilize our form-building software to draw up and fill out the correct purchase order form.
When a company is just at the start of its journey, and there are not so many transactions, you can ignore to fill out purchase orders. But as the enterprise grows, the demand for them increases. So, hereunder we have drafted a list of perks and reasons why you need to decide to use these legal forms:
You can always remember all the necessary data about the delivery of goods. By looking at the document, you can recall the shipment date, how much you paid, or what exactly and in what quantity you ordered. Assign a number to each order, and you will be able to monitor the timeliness of its execution.
If there were any difficulties with the order, for instance, the supplier violated the terms or sent the wrong product, you can apply to this document as evidence. In its absence, solving the problem can take much longer.
The purchase order excludes all misunderstandings between the buyer and the potential supplier. All the data the supplier needs is collected in one paper, so they can quickly create an order and send it.
The presence of purchase orders greatly facilitates and speeds up the audit process both for the auditors and the entrepreneur. The auditors, in turn, can use an easier way to cross-check statements and collect the necessary papers.
There are several types of Purchase Orders:
As we have mentioned, this form is issued to order purchased items. The amount and cost of goods, as well as delivery terms, are necessarily indicated here. Enterprises use the form cause they are the ones people tend to approach with large orders.
Such an order is generated based on assumptions about how many items may be useful in the future. Based on many factors such as the usual purchase volume, number of clients, amount of company personnel, and additional factors of value in a particular order. The manager forms such an order to give recommendations that can be followed.
Sometimes, a purchase order is part of a settlement. The contract provides for the agreement of both parties to the articles and offers both parties legal protection. This one is an official paper that both parties sign after reviewing and making changes. It covers the list, quantity, and value of the agreed goods.
It is an informal pricing agreement for several upcoming orders. Companies can agree on acceptable terms to both parties for multiple orders and document them in a Blanket Order.
While a purchase order is a handy thing, it is not always necessary. Here are the cases when you can refuse to issue this document:
In your company, you can set a start value for building a purchase order. For instance, do not issue a document for goods totaling less than $300.
Since the purchase order must indicate the price of goods or services, it remains impossible to issue an unknown amount (when it includes legal services, for example).
Such purchases include rent payments, correspondence subscriptions, electricity, internet, and others.
For such charges, another form is used (reimbursement request). Such expenses may include employee travel expenses, study, entertainment, and more.
Undoubtedly, these two papers have some similar information, but they have completely different purposes. The purchase order is filled out by the buyer to ensure they receive everything they require. Whereas the invoice is issued by the seller after the purchase approval to document the amount they will receive for their goods or services. In the invoice, you can specify the number of your purchase order to compare the information in both forms.
Based on the titles of these documents, you can already understand that purchase orders confirm a purchase, while sales orders confirm a sale. Accordingly, the buyer fills out and forwards the purchase orders to the seller. In comparison, the sales orders are given vice versa by the seller to the buyer before the order is fulfilled.
In other words, a purchase order indicates a request has been placed. A sales order confirms the trade and shows the time and method of delivering the goods or services.
Here are a few steps you must take to complete your purchase order.
The first step is to draw up a purchase requisition and transfer it to the purchasing department. The department decides on the further fate of the application. It can be accepted, rejected, or submitted for discussion.
Let’s say the application was accepted. Next, a purchase order should be formed.
The purchaser must supply the data about themselves and put the date for filling the form.
Next, enter the details of the intended supplier and instructions and the date of the desired delivery.
You need to fill in the data on the desired goods or services in the corresponding boxes. Please indicate their quantity, respective names, specifications, unit price, and total cost.
A purchase order is transferred to the seller.
The seller may not always be able to accept the order, as the product may not be available at the specific time, or the delivery conditions or cost may change. The seller matches the purchase order with their abilities and gives an answer to the customer. If they can support the order, then the delivery and invoice are prepared. If not, then they continue the communication further and either make corrections or cancel it altogether.
After the payment confirmation, the supplier ships the order and invoice.