What is a Purchase Order?

Creating Purchase Orders is a key stage in the purchasing process of the company. A Purchase order is a document that is sent to a supplier, and it is also a specification describing the goods and services that need to be purchased.

What information a Purchase Order contains?

Although the availability of some information may vary depending on the company, usually an Order must contain the required information:

  • a name of the buyer company and information about the legal entity, address
  • a supplier’s name and information
  • a place of goods receipt
  • delivery method, details and terms
  • a description of the requested goods / services: code, name or description, quantity, unit of measurement, price of the goods (currencyif necessary), sum
  • an additional instruction to the request for the supplier
  • a person, responsible for placing an order

The more detailed the information in the request is, the more effective the purchase itself can be performed.

How does it work?

Since the creation and operation of orders is the stage after which the purchase itself is carried out, the responsibility for it usually lies on the company’s Purchasing department.

The order can be formed due to purchase requests or without them.

In which cases are purchase requests necessary for an order formation?

  • a consolidated order for several departments / divisions / units is formed
  • For the purchase justification the information on the purchase initiator is required (mainly used for bulk purchases)
  • an order for the supplier is formed very rarely and requests are used for information gathering, and after they are combined in one order

Advantages

  • A purchase order allows you to explain clearly your requirements to the supplier and can be used to verify the conformity of the received goods to the ordered ones;
  • With the help of purchase orders, you can easily track and manage orders;
  • Purchase orders help control effectively a company expenses, create a budget and identify emergency expenses;
  • Based on the orders, a company has a complete transparent picture of all types of purchases and can plan future deliveries and payments better.Purchase orders are important for the audit analysis, as they clearly record the confirmation of the company’s need and can confirm that the supply was justified.

Purchase Orders Confirmation

In order to monitor carefully the need for goods / services, the selection of a supplier, the compliance with the established budget of the company, you must configure the hierarchy of statements.

If such a process is configured, each purchase order must be confirmed at all levels before it is transferred to a supplier for execution.

 

Procure smarter

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