What is a Purchase Order? Come on, Find Out Its Function!

What is a Purchase Order (PO)? This question may often arise in your mind at this time. As product demand increases, business processes become more complex. If in the past you could easily order material from suppliers via email or telephone, now the supply is difficult to manage. This is where the purchase order has an important role.

Purchase Order (PO) is a document created by the buyer to show the goods they want to buy from the seller. A purchase order is also a contract that forms an agreement between the buyer and seller regarding the goods the buyer wants to buy. Unlike invoices, which are made by the seller and sent to the buyer, the purchase order (PO) comes from the buyer and is sent to the seller.

Also read: Aspects that Differentiate Sales and Marketing

Aspects of a Purchase Order

In addition to information that shows details of the company involved and the date of the order, the purchase order also contains important details about the items to be purchased by the buyer, including the name of the product, the number of items purchased, the price, and also additional conditions for sales such as discounts. Purchase order is a letter of request for goods with the amount and price stated by the buyer.

What Happens After a Purchase Order Is Sent?

After the purchase order has been made and sent to the seller, the seller then decides whether to accept the contract or not. If the purchase order is accepted, the seller has agreed to sell the product and the amount listed at the price set by the buyer. The seller then issues an invoice ( invoice ) to the buyer based on the purchase order.

For example, an electrical installation company needs to buy new materials from suppliers to create their products. The company then makes a purchase order to be submitted to the supplier from which they want to order the material.

The supplier agrees to fulfill the purchase order and send the material to the electrical installation company and the invoice . When the installation company receives the goods and invoices, they compare it to the purchase order that they sent. If the documents and goods match, the company will pay the bill.

Purchase Order function

Although it looks quite complicated to order goods from suppliers using purchase orders, the purchase order with the PO will provide security from additional fraud and secure the availability of materials at the desired price

Some Things to Look for in Making a Purchase Order :

  • As a customer, clearly state the company’s identity in the purchase order.
  • Enter any details that you will order, such as brand, item name, quantity, and other information.
  • Clearly specify the manufacturer or supplier you chose.
  • Mention the media as a place for advertising the products offered (if deemed necessary).
  • Mention the form and number of orders in detail, if needed make a list in the table to facilitate tracking and service.
  • Mention the shipping method, shipping time, payment method, and shipping method that you want.
  • Enter the PO number (purchase order). This number is very important to search if there are errors or problems.

Conclusion

From the above explanation, at a glance we will understand the understanding, uses and examples of purchase orders. Well, if you still have difficulties related to making a purchase order for a business, you can get it easy by registering your business with the Journal. Journal is a cloud-based online accounting software that makes it easy in all accounting processes such as making purchase orders to financial statements.

 

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