As a business owner or manager, you may have heard of the term “purchase order.” But what exactly is a purchase order, and why is it important for your business? This blog post will explain what a purchase order is and why it’s important for managing your business’s purchasing process.
What is a purchase order?
A purchase order (PO) is a commercial document buyers send to sellers when placing an order for goods or services. It outlines exactly what you want, including type, quantity, price, and any special terms or conditions. Once the seller accepts it, the purchase order becomes a legally binding contract for both sides.
Small businesses use purchase orders to keep everything clear and above board. You avoid mix-ups, stay within budget, and make sure you get what you ordered.
Why are purchase orders important?
A purchase order helps formalize your purchasing process and reduce the risk of misunderstandings or mistakes, even when you’re working with trusted suppliers. Purchase orders give you a clear record of every order. You know what you’ve requested, what you’ve paid, and what’s still outstanding. This makes it easier to manage your inventory, stay within budget, and resolve any disputes with suppliers.
Some reasons why your small business may need a purchase order include:
- Ordering the correct items, at the correct price, and with any necessary terms and conditions clearly stated
- Make sure all your employees, suppliers, and accountants are on the same page with your purchasing process by formalizing it
- Maintaining an accurate record of your orders and keeping your budget within reach
- Making sure you are protected in the event of a supplier dispute or disagreement
Using Bookipi’s user-friendly purchase order maker & organizer, you’re more confident with your supplier transactions.
How does a purchase order work?
Here’s how the purchase order process works in real life:
- The supplier sends an invoice. You pay for the goods or services, referencing the purchase order number for accuracy.
- You identify what you need. Maybe it’s office supplies, raw materials, or services.
- You create a purchase order. List the items, quantities, prices, and any special instructions.
- You send the purchase order to the supplier. The supplier reviews it and either accepts or rejects the order.
- If accepted, the supplier fulfills the order. They prepare and deliver the goods or services as specified.
- You receive the goods and match them to the purchase order. This ensures you get exactly what you ordered.
What should be included in a purchase order?
A solid purchase order has everything your supplier needs to get your order right. Here’s what to include:
- Your business name and contact details
- Supplier’s name and contact details
- Unique purchase order number and date
- Detailed description of goods or services
- Quantity and unit price
- Total amount, including taxes and shipping
- Delivery address and expected delivery date
- Payment terms and conditions
- Any special instructions or notes
Bookipi’s business templates make it easy to include all this information with just a few clicks. You can customize the template with your logo and branding, so your purchase orders look professional and on point.
What is the difference between purchase order and invoice?
Purchase orders and invoices look similar, but they play different roles. A purchase order is issued by the buyer before the goods or services are delivered. It’s your official request for what you want, at what price, and under what terms. It’s a contract between you and your supplier.
An invoice comes from the seller after the goods or services are delivered. It’s a request for payment, showing the final cost, including taxes and fees. The purchase order sets the stage, and the invoice closes the deal.
Make invoices, purchase orders & other sales documents with Bookipi
You might wonder, “What if my supplier doesn’t accept my purchase order?” or “How do I keep track of all my orders?” These are real concerns. With Bookipi, you get real-time updates on order status, so you always know where things stand. If a supplier rejects an order, you can revise and resend it quickly.
Another common worry is over-ordering or double-ordering. Purchase orders help you keep track of what you’ve requested, so you avoid duplicate orders and stay within budget. When you use Bookipi, you can review all your purchase orders in one place, making it easy to spot any issues before they become problems.
