Within every business, there are certain processes integral to success and one of these should be your purchase orders. Sure, you give invoices to people who buy your products but what about the other way around? Just as important, you should also be issuing purchase orders to all your suppliers. If you’re not doing this currently, keep reading because you could be making a huge mistake.
What is a Purchase Order? – Although very similar to an invoice, a purchase order (PO) is issued by the buyer to the seller in order to lay out the conditions ofa particular transaction. On a simple sheet of paper, the PO will show the products ordered, how many of each has been ordered, and what price is going to be paid. In terms of pricing, the PO will normally be itemized so it shows the price of each product before then coming to a sub-total.
If your custom is regular and the same order is placed each time, there is normally an opportunity to create a standing PO. By doing this, you can use the same PO number and all the orders can be filed into one folder as opposed to having various different numbers.
Why are Purchase Orders Important? – By issuing a PO every time you order from a supplier, it allows you to stay in control of your expenditure as well as having full visibility on all incoming stock. With orders being made from different companies all the time, you should be aware of when orders are coming, how much stock is coming, and when the payments need to be made. As soon as a proper PO system has been introduced, it should take you seconds to find out what has been ordered, shipped, received but not paid, etc.
All things considered, your PO system should be seen as a planning tool. By knowing exactly what’s going on in your business, how much you’re spending, the amounts of money you still owe, and more, you have better control over your future budgets. Often, companies are crippled by their own lack of organization because they spend more money than they have. With a PO system, this danger is removed because you’re aware of your available money once all invoices have been paid.
Legal Protection of Purchase Orders – If the previous reasons haven’t swayed you one way or another, you should know that purchase orders are legally binding once they’ve been accepted by the seller. Therefore, it becomes an official contract and it gives you the control over all orders that are made.
For example, you might be left waiting for an order only for your supplier to refute that an order’s been made. Elsewhere, your items could be damaged upon arrival. Without a PO system in place, you would have trouble returning the items or proving you made the order in the first place if the supplier wanted to play games. With a purchase order sent off, it should have sections laying out the performance of the shipment and delivery dates; this proof will save you time and time again.
Summary – Nowadays, you can actually do this all online so it becomes easier to follow and keep up-to-date. If you want to avoid legal battles, missed deliveries, and mistakes with stocks, now, is the time to invest in an efficient PO system regardless of your industry!