PURCHASE ORDER: A CRITICAL TOOL

Keeping track of progress is vital in any business, particularly in

transactions. This provides the company with a detailed history of purchases
and who made them, which they can use to weigh future decisions or decide
on the next course of action based on the availability of resources. This is
where a purchase order comes into play.

In the inventory management process, purchase orders are critical. If

the supplier gets the order, the goods listed will be pulled from their
inventory. The purchase order is useful for keeping abreast of daily supply
and identifying any discrepancies between reported and actual stock.
Furthermore, the supplier requires the PO in order to properly fulfill the
order. The supplier will charge the buyer in addition based on how you pay
through the terms specified in the equipment. But how do we obtain or
obtain a purchase order?

In the company's purchasing department puts an order with one of its

distributors or suppliers, a purchase order is issued. The commodity
categories, quantity, and price of the things to be purchased are all specified
in the paper. It is, in essence, the agreement that the buyer drafts when
purchasing things from a supplier. To be more specific, the procedures
involved in placing an order and receiving a purchase order are as follows.

A purchase requisition is first created by the buyer. The steps are to

prepare a buy requisition before sending the purchase order to the supplier.
This is a document used by the purchasing department of a corporation to
keep track of the goods that have been ordered. The purchase requisition
can also be a help in the company keep track of its expenditures. Only after
the authorized manager has approved the purchase requisition is the PO
created.

The buyer then will create all the given order. Once the items are good
to go and the purchased have been agreed upon, the purchase order is
generated. The PO contains the following information: the order date, FOB
shipping, pricing terms, purchaser and supplier names, a specification of the
commodities being procured, product code, price, volume, as well as the
Order number.

Third, the seller accepts (or rejects) the buyer's purchase order. The
purchase orders will be including a line at the bottom for the seller who
authorize manager to sign. It includes the PO’s all of the transaction's details
as well as the buyer's expectations. After receiving the PO, the seller has the
option of accepting or rejecting it. The PO will become a legally enforceable
contract including both entities once it is accepted.

      Finally, the customer enters the purchase order into his or her
computer. An open requisition is the one in which buy was placed but the
products have not yet arrived, or only a portion of the order has arrived,
after it was placed. In either case, it indicates that the delivery of the items
is incomplete.

We now understand what a purchase order (PO) is and how to obtain

one, but do we realize the critical role PO’s play in the company's
procurement process?

Orders are less likely to be placed twice when it is used. It can help
you keep track of what you've ordered and who you've ordered it from.
When matching invoices is difficult when a buyer requests an item that is
similar to the first one, the Purchased orders serves as a check to cover any
outstanding invoices. In addition, help manage incoming orders, and a well-
organized buy order system can help with shipping and inventory of orders.
Purchase orders are also legal documents that help to avoid future problems
over the purchase. A documented agreement on the prices and number of
items in your order protects both you and the seller. Purchase orders protect
you by giving a legally records of what you bought and at what price.

In conclusion, in any purchase carried out by the buyer and seller, a

purchase order is essential to record important data from each transaction
with ease. This includes the date, shipping information, terms, information of
the parties, specification of the products and additional information’s that is
key to tracking purchases and resolving discrepancies along the way. It's a
simple process, but when done incorrectly, it can become a complex
problem. As a result, it is critical for all businesses, large and small, to
obtain a PO before doing business or closing a deal.