A company that sells products or needs supplies on a regular basis must have a purchasing unit or point of contact. The person in charge of this process is called a purchasing agent. Before ordering inventory for a business, it is important to understand the basics of the ordering and purchasing process.
One of the first steps of the inventory ordering and purchasing process is to evaluate the items the company might buy. A prudent purchaser is concerned about quality when it comes to inventory needs. He is responsible for making sure that the company does not receive a poorly made product or the wrong raw material. So purchasers commonly order sample materials, products and supplies to ensure they meet the company's quality standards.
Once the purchasing representative decides on a provider and the products needed, the next step is to negotiate a sales agreement. In the sales agreement, the purchaser and distributor agree on a price discount for inventory items and payment terms. For example "net 30" means that payment is due 30 days after the date of invoice. The agreement also lists conditions and rules for returns, exchanges and payment for freight costs.
Submit Purchase Order
The next step is for the purchaser to send the distributor, wholesaler or manufacturer a purchase order. The purchase order is a commitment to buy items, as long as the recipient delivers. The purchase order outlines the exact items the purchaser desires for inventory and the address for shipping. It also lists a purchase order number, account number (assigned by the distributor or manufacturer) and a summary of the terms both parties agreed on.
The distribution company receives and processes the purchaser's purchase order. After shipping the items to the purchaser, the distributor then issues an invoice to request payment. The invoice contains the purchase order number, account number, address of the purchaser, a description of the items shipped and the total amount due. The invoice also lists the date of issuance and the terms (such as net 30, due within 30 days) so that the purchaser can submit payment on time.