Keeping track of inventory and ordering supplies and salable goods may not be your favorite tasks, but it's certainly essential to your company's success. A purchase order (PO) is an essential document for a well-managed purchasing process. Let's find out what PO is!
1. What is PO?
What is PO?
A PO (short for “Purchase Order”), or purchase order, is a formal document issued by a buyer that undertakes to pay a seller for the sale of specific products or services to be delivered. Future.
Like your “shopping cart” on an e-commerce website, an order is basically a list of what you want to buy.
The advantage for the buyer is the ability to place an order without immediate payment. From the seller's perspective, PO is a way to provide the buyer with credit without risk, since the buyer is obligated to pay after the product or service has been delivered.
Each PO has a unique number associated with it to help both buyer and seller track delivery and payment. PO is a commitment to purchase a product or service continuously, until a certain maximum is reached.
For larger organizations, purchase orders are the second step in the purchasing process. For people outside of purchasing who need something for the business - whether it's something as simple as office supplies or process room supplies can start with a booking request. goods, also known as requisition. This is a document similar to a purchase order that outlines what to buy, how much, where to buy from, etc.
Purchase requisitions are sent to the required staff for approval. If it is not approved, the approver can provide a reason why it was rejected and request corrections before approval is passed. Once approved, the purchase requisition turns into a purchase order and goes to the supplier for approval and processing.
The difference between a requisition and a purchase order is that it acts as a contract between the buyer and the seller. By submitting a purchase order (PO), the buyer undertakes to purchase the goods or services for the agreed amount. Since the PO will be made before the buyer receives their invoice, the purchase order provides the seller with insurance against non-payment.
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2. Contents of PO
The PO includes the following:
Contents of PO
Date Range
Quantity purchased.
Products or services are purchased.
Specific brand name, SKU, or model number.
Price per unit.
Delivery date.
PO number
Business information, including: Company name, contact information
Place of delivery.
Payment address.
Payment terms, eg on delivery or in 30 days.
3. How are orders used?
PO simplifies the purchasing process, which typically looks like this:
Buyers have decided to purchase a product or service for their business.
The company issues a PO to the seller, usually using an electronic purchase order form.
The seller receives the PO and confirms that the company can fulfill the order. Otherwise, the seller will tell the buyer that the order cannot be fulfilled and the PO will be cancelled.
If the order can be fulfilled, the merchant begins to prepare the order by pulling the inventory together or scheduling the necessary staff.
Orders are shipped or serviced with a PO number on the packing list so the buyer knows which order has arrived.
The seller will invoice the order, using the PO number so that it can easily match the shipping information.
The buyer pays the invoice according to the terms stated in the PO.
4. Pros and cons of orders
Pros and cons of orders
There are many advantages to using POs, the most important of which are:
PO helps improve accuracy, in both inventory and financial management.
Better budgeting, as funds are required before the PO is issued.
Faster delivery, as PO helps to schedule delivery when the buyer needs it.
On the downside, there are very few:
Much unnecessary paperwork for small purchases.
From a financial perspective, credit cards can serve the same purpose.
5. Benefits of using orders
Benefits of using orders
For buyers:
Track your inventory and purchase history.
Order in specific quantity and in advance.
Select the delivery date you need.
You don't have to pay upfront.
For Seller:
Track sales and recurring orders.
You can use purchase orders (POs) to generate your invoices.
It's a buyer-paying commitment, giving you legal security.
Above is some information about order (PO) content, advantages and disadvantages as well as benefits of PO that Giaiphapdonggoi.net provides to you.
