What is a Purchase Order?
A purchase order is a way for businesses and companies to order goods and services. Some times a purchase order is referred to as a purchase requisition, or simply a P.O. The purchase order is a written document between the purchaser and seller detailing items, services and other necessary information regarding the goods and services that the purchaser intends to buy from the seller.
Who Issues a Purchase Order?
Purchase orders are initiated by the purchaser and typically are on uniquely numbered, pre-printed forms. Depending on the size of the company, one person may be responsible for initiating purchase orders, such as a Purchasing Agent. Or several people within a purchasing department may share the task of ordering goods and services.
What Information is on a Purchase Order?
The information provided on a purchase order may differ between companies, depending on the type of goods or services required. However, most purchase orders contain details of the goods and/or services being ordered. This information may be as detailed as so desired by the purchaser. The most important item regarding a purchase order, is the unique number of the purchase order. This number will be used to track purchases, outstanding orders, shipments received and accounts payables. Some of the other details included on a purchase order are: the description of parts or labor, part numbers, quantity purchased, unit cost, total cost, payment terms, delivery methods, delivery dates, shipping terms, ship to addresses, discounts offered and may include contact information should a question arise about the order.
What Happens When a Purchase Order is Received?
Today's technology allows for purchase orders to be sent via the postal service, email, fax and telephone. Once a distributor of goods or services receives a purchase order, necessary steps are taken to fill the order. When the order ships, a packing form is generally included with the shipment, referencing the purchase order so that when the goods are received, the order can be marked complete. After the order has been filled and shipped (or performed, if labor is involved), an invoice requesting payment will be sent from the seller to the purchaser. The invoice will also reference the purchase order number. Upon receipt of the invoice, accounts payable can verify and cross-reference the invoice to the purchase order. The final step is the payment of the invoice by the purchaser for the goods and services received.