Firstly what IS a purchase order?
When the supplier accepts the purchase order, it forms a contract between you. This means clarity for both you as the buyer and the supplier as seller because:
You, the buyer have clearly and specifically communicated your requirements and intention to buy
The seller is then protected in terms of recouping money owed for goods or services supplied.
Here’s 5 good reasons to use them:
1. You are organised – instead of trying to remember phone conversations or search through various emails, both you and your supplier can find all the details relating to your purchase in one document such as prices, quantities, contact details and delivery address etc.
2. More efficient – especially if you have electronic versions of your purchase orders, you can easily manage your expenditure on your computer rather than rifling through reams of paperwork, which may or may not have been filed in the right place!
3. Avoid mistakes! There should be minimal mix ups or misunderstandings relating to what you ordered or the prices agreed if it’s all there in writing for everyone to see. It’s a legally binding document.
4. Easily keep track of orders – as each purchase order has a unique number, your supplier can quote this number on their delivery note so you can match up the goods with your order when you receive them.
5. Keep in control of your accounts – you will have the figures for all your purchase expenditure at your finger tips. If you use accounting software, you can transfer this information into your accounts at the click of a mouse. This will help you be in control of the money which has gone and is due out of your business and help keep on top of cashflow.
The example above, illustrates the kind of information you should include on your purchase orders. You can create your own templates or use simple accounting software to automatically create and edit your purchase orders.