Purchase Order

A purchase order is a document that a buyer uses to place an order with a seller or supplier. The PO contains important purchase data such as contact information, dates, product information and terms and conditions. In general, an order is a legally binding document after the seller has agreed to the contract. If you need to buy small business inventory, you can create an order and specify what you need. You need to make a copy of the purchase order you made and keep it for your records. On the other hand, you may receive orders from your customers, buyers. Once you have received your order, we will prepare for delivery or pickup of the requested item and contact the customer to issue an invoice. Keep the orders received for your records and document the process.

Purchase Order Meaning

A purchase order or PO is an official document issued by a buyer who pledges to pay the seller for the sale of a particular product or service offered in the future.  The advantage for Buyers is that they can order without immediate payment.

Purchase Order vs. Invoice

Many people make the mistake of confusing purchase orders with invoices. However, knowing the difference between purchase orders and invoices is crucial to filling out the correct paperwork. So, what exactly is a bill? A bill is an invoice. POs are used by buyers to request things from merchants. Invoices are created by sellers to request payment from purchasers.

How to create a Purchase Order ?

The buyer needs to know the information that needs to be included in the order. The order format for they may vary, but you must provide the following standard information:

• Product, Quantity, Price:  Lists information about the product you want to buy. Specify the number of products you need and the price of each unit.
• Total Price: Sum the prices of the products you want to order and enter the total below. 
• Date: This may seem obvious, but you need to include the date the order was created. 
• Order Number: Number the order so that both you and the seller can track the order. 
• Buyer Contact Information: Lists contact information such as name, company name, address, phone number, and email address. 
• Seller Contact Information: Includes the seller’s name, company name, address, phone number, and email address. 
• Shipping Details: Most sellers ship the item after receiving the order. Specifies where the seller will ship the order. Alternatively, specify whether to collect the order.

Purchase Order Terms and Conditions

This part of the order is essential. Specifies the conditions that the seller must meet in order for the order to be legally binding. Add conditions such as price, delivery date (if you plan to receive the order), payment due date, etc.

What to do if you receive a PO ?

• The purchase order process begins when you get a PO from a customer.
• Prepare a purchase order based on the terms and conditions when you receive one.
• Notify the buyer when you receive the PO if you are shipping the delivery to them. Also, notify your customer when the order is shipped. Include a tracking number so the buyer may follow the shipment’s progress online.
• You can construct an invoice to send to the buyer once they get their order.
• Keep a record of the buyer’s purchase order. You can refer to the original PO if the buyer believes you did not follow the purchase order terms and conditions or made a mistake. Also, for your records, make a copy of the invoice you create. You’ll know when the buyer’s payment is late this way.

How is a Purchase Order Used?

A purchase order (PO) streamlines the purchasing process, which normally goes like this:

• Buyer decides to buy a product or service for his company 
• The business issues a purchase order to the seller, usually using an electronic form of the order  
• The seller receives the order and confirms that the company can fulfill the order 
• If this is not the case, the seller notifies the buyer that the order cannot be executed and the buy order is cancelled.
• If the order can be fulfilled, the seller will begin preparing the order by collecting inventory or scheduling the required staff. 
• Orders are shipped with the order number on the packing list or the services provided so that the buyer knows which order has arrived. 
•  The seller uses the order number to request the order, so it can be easily collated with the delivery information. 
•  Buyer pays invoice according to the terms specified in the order

Conclusion 

A purchase order (PO) is a legal document sent by a buyer to a seller to document the sale of goods and services offered at a later date.  This allows buyers to place an order with a supplier without immediate payment. Sellers use PO to provide risk-free credit to buyers. This is because the buyer is legally required to pay when the goods or services are delivered. If approved by the seller, the order becomes a legally binding contract. If you do not have a contract that regulates the relationship between the buyer and the seller, you can place an order. This provides legal protection for buyers and sellers.