Purchase Order (PO) is an important tool in the purchasing process for companies or organizations. This document serves as a form of written instructions used by buyers to order goods or services from certain suppliers or vendors. POs contain very important information, such as order details, including the quantity of goods or services ordered, price, type of goods/services, terms of payment, and expected delivery date.
PO’s primary role in business processes is to become a formal, binding contract between a buyer and a supplier. As a contract, PO outlines the agreement between the two parties before the transaction is carried out. Thus, POs help prevent misunderstandings between buyers and suppliers, as well as minimize the risk of disputes or errors in transaction execution. POs also provide clear guidance to suppliers on what buyers expect, including the quantity of items to be supplied, terms of payment, and delivery times.
In addition, Purchase Orders also have an important role in managing the overall purchasing process. With a PO, companies can manage inventory more efficiently because the required orders are clearly recorded. This helps companies plan inventory needs and avoid the risk of shortages or excess stock. POs also help control expenses by ensuring that every purchase is made according to the approved approvals and budget.
Create and Send Purchase Orders (PO)
How to efficiently create and submit Purchase Orders involves several important steps. First, identify the company’s needs for the goods or services to be ordered. Make sure there is an adequate budget before creating a Purchase Order. Next, use the Purchase Order template that the company has prepared or find a suitable template online. This template will help ensure that the required information is included in the PO.
After that, fill in the order details completely and accurately in the Purchase Order. This includes information such as the buyer’s and supplier’s company name, unique PO number, details of the goods or services ordered along with quantity, price, and description, terms of payment, and delivery date. Make sure all the details have been checked and approved by the proper authorities before submitting the PO.
Sending Purchase Orders can be done via email or through the purchase portal that has been set by the company. Be sure to include a clear email subject, as well as the correct contact information for the supplier. After the PO is sent, carry out follow-up actions with the supplier to ensure that the order is received and processed according to the desired schedule. Keep communicating effectively with suppliers and ensure all relevant information is updated in case of changes in orders. By carefully executing these steps, companies can create and send Purchase Orders efficiently, which in turn supports a smoother purchasing process and inventory management.
Information contained in the Purchase Order (PO)
To ensure accurate and complete transactions, a Purchase Order (PO) must include detailed and precise information. The following information must be included in a Purchase Order:
1. Company Identification:
– The full name and full address of the buying company or organization.
– The full name and full address of the supplier or vendor.
2. PO Unique Number:
– Each Purchase Order must have a different unique number to facilitate tracking and recording in the system.
3. Details of Goods or Services:
– Full and specific description of the goods or services ordered.
– Quantity ordered (number of units, weight, volume, or other units).
4. Price and Total Cost:
– Price per unit of goods or services ordered.
– Total cost for each item ordered.
– Total total costs (subtotal) before tax and discount (if any).
5. Payment Terms:
– The payment method to be used (bank transfer, check, credit card, etc.).
– Payment deadline or payment due date.
– Other relevant payment terms (eg partial prepayment).
6. Shipping Terms:
– Expected delivery date (appointment date).
– Shipping instructions, such as shipping address and consignee contact.
– The shipping method to be used (courier, land transportation, sea transportation, etc.).
7. Special Requirements:
– Additional or special requirements, if any (eg, specific quality requirements, certification, warranty, technical support, etc.).
8. Name of person in charge:
– Name and contact (phone number, email) of the individual or department responsible for this order on the buyer’s side.
9. Signature and Date:
– Signature from the authorized party in the buyer’s company as a sign of approval of this order.
– Purchase Order creation date.
The information above must be filled in carefully and accurately so that the Purchase Order can serve as a clear guide for suppliers and ensure that the transaction goes as expected. By providing complete and precise information in a PO, companies can avoid mistakes and misunderstandings in the purchasing process, and ensure that the goods or services ordered are in accordance with the specified needs and requirements.
Purchase Orders, Invoices and Receipts
In the purchasing cycle, Purchase Order (PO), Invoice (invoice), and Receipt (receipt) are three different documents with their respective roles.
1. Purchase Orders (POs)
Purchase Order is a document created by a buyer to order goods or services from a particular supplier or vendor before a transaction is made. POs serve as written instructions outlining the details of an order, including quantity, price, type of goods/services, terms of payment, and expected delivery date. PO’s main role in the business process is to become a formal binding contract between the buyer and the supplier before the transaction is carried out. Thus, POs help prevent misunderstandings between buyers and suppliers, as well as minimize the risk of disputes or errors in the execution of transactions. POs also provide clear guidance to suppliers on what buyers expect, including the quantity of items to be supplied, terms of payment, and delivery times.
2. Invoice (Invoice)
Invoice is a document created by the supplier to request payment from the buyer after the goods/services have been delivered or provided. The invoice contains details of the order that has been filled in the PO, including the quantity of goods or services delivered, the price per unit, the total cost amount, and payment details. Invoice serves as an official bill that informs the amount to be paid by the buyer to the supplier. When the buyer receives the invoice, they are expected to pay the stated amount according to the payment terms agreed in the PO. Invoices are very important in the accounting process and help monitor company debts and support accurate financial reports.
3. Receipt​​​​
Receipt or receipt is a document made by the recipient of the goods or services as proof that the goods/services have been properly received. Receipt contains information about transactions that have occurred, such as date of receipt, amount, and description of goods/services. These receipts are usually retained by the purchaser as proof of receipt and as a reference for accounting and auditing processes. A receipt differs from an invoice in that it does not state a request for payment, but only indicates that the goods/services have been properly received by the recipient.
