Purchase Order Request Form

Purchase Order Request Form
What is Purchase Order Request Form?

A Purchase Order (PO) is a document that is commercial and legally-binding and connects a buyer with a supplier. It indicates types, quantities, and prices for the products or services. It also provides relevant details about a product or service as well as defines the conditions for purchasing from external suppliers. In addition, it sets payment terms, date of shipment, and other terms and conditions. The issue of such an order is not necessarily an initiation of a contract. In case no agreement exists between the buyer and supplier, the confirmation of the purchase order may later serve as a legal binding.

PO Purposes

Purchase orders are generally used in case a buyer wants to purchase any supplies on account. It is used as a legal protection for the supplier, as the supplier sends the product before the payment. Besides providing a legal protection, purchase orders are crucial in the inventory and payment tracking. They also give suppliers the ability to manage and compare the products that were ordered to the ones that were shipped. It enhances company’s data management and ensures easy payment tracking. Purchase orders can also serve as legal receipts of the items that were purchased before and as a precedent to claim the product or service.

PO Submission

A purchase order is always prepared by the buyer through the purchasing department. The process of creating a purchase order is usually done via electronic systems which give you more significant opportunities in tracking and submission to the supplier. PO also includes a PO number, which can be used to match received shipments with the purchases, shipping dates and addresses, quantities and prices, billing addresses and requested items. There are multiple templates on the web for you to follow that also has entry fields for all the necessary data.

Order Processing

As soon as the buyer submits the order to the supplier, an in-progress purchase is created. The status of the order remains that way until the buyer receives the items to his warehouse. After the inventory is delivered, it is scanned into the inventory database and automatically matched to the proper purchase order. It is then processed in the order that requires payment. At this point, the buyer is responsible for paying the supplier the agreed money for the order. The payment itself should include the purchase order number, preferably along with the company's name and account number.

Use of Purchase Order on the Supplier Side

Purchase orders are used not only by the buyer. They can be used by the suppliers as well to fulfill payment processing. Upon receiving one, the purchased order is used to start pulling, packaging and shipping the needed inventory. Once it is pulled, it is time for the supplier to create an invoice based on the items that have been prepared for shipment. With purchase order, it is easy to record a product in the inventory, even after it has already been shipped. The requests can be filed electronically with an option to create a paper copy and keep it for the records. It is also useful to process and monitor payment and enforce the policies.

Purchase Order vs. Purchase Invoice

A purchase invoice is used along with purchase order and can show you how much money the supplier still needs to get from the buyer. Invoices can also be called and referred to as “bills,” “statements” or “sales invoices.”

With an invoice, you can describe the product that was delivered to the customer as well as the price of it. Besides that, you can also set payment terms to the buyer. It is also a good practice to use online tools to create and send the invoices. A proper invoice would be organized, well-structured and would include:

● Date of issue;

● Invoice number;

● PO number;

● Quantity of products that were ordered;

● Price for each product purchased;

● Any applicable discounts;

● Taxes that apply to the purchase;

● Total cost of the products;

● Names and addresses of seller and buyer;

● Signature of a seller.

When an invoice is used properly, it can help small businesses to adequately track all expenses and revenue, as well as provide a written record of the goods and services that have been sold. It is also easy to manage buyers’ accounts and tell who has an outstanding balance and who still owes money.

Keeping a proper database of invoices, you will be surprised by how much easier it will be for you to pay your taxes, as it will show you the real amount of money that you have earned over a specific period. There are also invoicing machines that can automatically schedule payment reminders for your customers and notify you about the payments that were received.

Therefore, with this in mind, let’s talk about some of the prominent similarities and differences that come up between purchase orders and purchase invoices.

First of all, the PO is the document that is prepared by the buyer during times when they order products or services. A PI, on the other hand, is used by the supplier to formally request the payment from the buyer for the goods that were sold earlier. This leads to the fact that PO is always sent to the supplier, while invoice is sent the other way around.

Besides that, purchase order lists details and delivery dates, terms and conditions of delivery and the price, while purchase invoice primarily focuses on the circumstances of payment and due dates of payment. Also, a purchase order always precedes an invoice and is issued when the customer places an order. PO can serve as a detail to the contract, while a PI confirms that the sale happened. Both purchase documents may include information about shipping specifics, delivery dates, PO and company account number. Both reports can also serve as legally-binding papers that ensure the safety of the deal.

Steps in Purchase Order Process

Here we offer several steps you can take in order to enhance the overall process of creating an excellent purchase order and help your company to stand out professionally. Please keep in mind, that while a purchase order can be used as a powerful tool, it is not the only one, it is just a single piece of a puzzle in a broader procurement process that includes multiple steps from identifying the need for a particular product or service to actual payment.

Step 1: Buyer creates a purchase requisition. The process of creating a purchase order should always start with a purchase requisition. It is a document that is written by the buyer and submitted to the purchasing department. During this step, you will be getting approval from your purchase department about the products and services you are about to buy. This is not the step where you order. This stage is about getting the approval for the money that will be needed in the future. With that in mind, your purchase requisition can be either approved, rejected or flagged, which means it will need further discussion. Do not mix the terms requisition and order, as they represent two different things, while order always follows the requisition.

Step 2: The buyer issues the purchase order. As soon as you have received an OK for your future purchas, go ahead and introduce the purchase order to the vendor. The purchasing department itself can also take this responsibility and send it to the vendor. POs are used to place the order and can be managed via electronic purchasing systems, which allows for a better tracking.

Step 3: The supplier approves, rejects, or flags purchase order for further discussion. The supplier always reviews the purchase order with a great deal of attention, being extra thorough when it comes to quantities ordered, prices, total amounts due, and terms and conditions. As soon as the supplier approves the PO (usually done by email), he starts to prepare and send out the goods. In case the supplier does not have an item that was listed in the purchase order, or they have any questions or concerns about the document, further discussion will be initiated until the final decision is reached.

Step 4: The buyer puts the purchase order in his records. This is the final step in the entire process, and it consists of simply recording the fact that this PO has existed and was executed. It will have an impact on the speed of processing the received products in the future in the warehouse and makes for a good habit in case of an audit.

After the completion of all the four steps of the purchase order process, the goods can be received and inspected. After that, the buyer receives a purchase invoice and completes the money transaction to the supplier.

Benefits of using a Purchase Order

Legal Binding. A purchase order serves as a legal document that confirms that the trade was initiated, and the transactions happened. This makes you confident that you will not suffer from fraud and the products that you have received were accurately priced. As soon as the supplier accepts the purchase order, the contract is formed, and you can cooperate under safe conditions.

Documentation. With POs you can get very accurate data about the products that were ordered, the prices that were paid and everything that is connected to the sale. The formal organized way of creating a purchase order leaves less space for the errors to occur and keeps all the data neat and orderly.

Cost management. With a PO, you can outline the amount of money you need to spend on a project before you even start it. Also, multiple POs can be used in case you have a complex and sophisticated project that requires a lot of effort to execute. It also allows you to link the products with the inventory and with the product they were bought with. This gives you significant automation of the application of costs in every stage of your project and manages the product’s lifecycle.

Save your time. When the supplier sends you back an invoice with a specific PO number, you don’t need to find out whether the bill is legitimate. Just compare the numbers on order and invoice and get rid of any disputes that may appear. The original PO sets up a legal binding from which the bill is issued, and this statement can be quickly processed by your accountants through the system by just a PO number.

Initiate business with the government and local authorities. While dealing with authorities, it is essential to keep the official practice intact. With a purchase order, you can just do so. To add to that, most of the agencies will only issue invoices upon receiving a valid purchase order. Knowing how to create a formal purchase order is a valuable skill that will expand opportunities for your business. Practicing official purchase orders shows other companies that you are staying on top of managing your finances, and you do not let any cash flow slip through your fingers, allowing for an organized system to be set up.

Valuable connections with suppliers. When compiling proper purchase order systems, you will be able to know your suppliers thoroughly and identify the best ones. It will be the binding document that will work for both sides creating a great professional communication. With POs you can easily answer any questions about the suppliers. In particular, where they get their products. How were the prices changing over time? Are there any discounts for you to receive? With PO, none of these questions will stay unanswered, which gives you a sense of control over the entire purchasing process and ensures the budget is well spent on the project.

Conclusion

PO can be used as a document that enhances the purchase process and allows for a better understanding between the customer and the supplier. It also gives your business an opportunity to appear professional and expand its reach. At the same time, by implementing PO in your practices, you will build valuable connections that will last a long time.