What Do I Do With This Large Purchase Order?

August 19, 2019
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Your company may have started off as a small business where transactions were basic and the amount exchanged was manageable. However, when a company starts to grow, the amount of money exchanged becomes higher which can create more details attached to each order. When basic e-mails or a phone call aren’t enough for your company to do business with suppliers, it becomes necessary to start doing transactions using Purchase Orders.

What Is A Purchase Order?

A purchase order, or more commonly referred to as a PO, is a legally binding document sent from a buyer to a supplier with a request for an order of goods or service. When created, a PO ensures the company will stay within budget and also where it is in the process. A buyer is protected with this document if the supplier doesn’t deliver the goods or services and the supplier is protected if the buyer neglects to pay. The PO needs to state in detail: the type of good or service, quantity, price, how it will be delivered, etc. The more detailed it is the more effective a PO will be. Also be sure to attach a number to it for easy tracking and documenting in systems. A Purchase Order is not the same as an invoice; an invoice is always sent from the supplier to the buyer after goods or services are delivered to the buyer.

Roles of Buyer and Supplier

After confirming there is adequate financial backing for the purchase order, the buyer creates the Purchase Order to send to the supplier. The supplier then delivers the goods or services to the buyer. When the buyer receives these, the PO should then be marked in the system as processed. Usually, after this step, the seller will then issue the invoice. If the goods or services provided to the buyer meet expectations it is now time to pay the supplier and the PO can be marked as paid: completing the Purchase Order process.

Whether a buyer or supplier, it’s wise to know how to best fulfill your role when working with Purchase Orders.

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