All companies; large or small, successful or failing, those that provide services and those that request services, need to purchase items for their businesses. This is where a purchase order comes in handy. It is a “contract” between a buyer and a seller, letting the seller know exactly what the buyer wants. These contracts clearly state what the buyer wants from the seller. If there is ever a dispute between the two about what was ordered, this document will clear up any questions.
The orders make it easier for the purchasing agent to keep track of what they have ordered or what another company has ordered from them. It will also supply the delivery date and terms of payment for the buyer. Computers have made this process much more efficient, permitting better inventory and tracking. Software programs provide entry fields for each important piece of information on the purchase order (PO). Some companies provide help for purchasing departments by streamlining the entire process and utilizing different tools so that the Purchasing staff doesn’t have to search for important requests or track down the purchasing agent when the supplier needed more information. This service costs money, however.
Contrasted With Invoices
Many people don’t understand the difference between these contracts and invoices. Buyers need to make out the orders, and once the payment has been received, sellers make out the invoices. Both documents contain the same information; the order number will be on the invoice to make sure the order is the same, and the other one will be a bit more detailed.
Why Bother with These Special Contracts?
Many companies don’t bother with purchase orders. Common thought is that they slow things down and they feel that their current vendors can be trusted. But the fact is that issues come up; communication problems or maybe information is not correct on an order. If there is no purchase order to refer to, there could be huge problems. A purchase order gives legal clarity and complete instructions for the seller.
If a company doesn’t use purchase orders they are probably overcome with documents; requisitions, quotations, order acknowledgements, advice notes, goods-received notes and invoices. Not only is it a lot to produce, but almost impossible to keep track of. Combining both requisitions and these special contracts would make tracking expenses a lot easier. When a company can actually see where their money is going, there are far fewer headaches.