Monday, 28 January 2013

Why use a Purchase Order?

Better tracking makes for better business,
Purchase Orders streamline the process.
Just to refresh you on the concept, a purchase order is a document that a buyer sends to a seller as an offer to buy products or services. Once accepted by the seller, the purchase order becomes a contract for the delivery of these products or services at the agreed-upon price and quantity. But of course, there are quotes, emails, phone conversations and other ways to agree upon sales details - so why should your company use a purchase order? There are a number of different reasons - better tracking, enhanced internal controls, profitability projections and more, but here are 5 we would like to start with:

5 Benefits of Purchase Orders

  • An effective purchase order can move the purchase process forward from discussion to commitment by laying out products, prices, timelines and other critical terms and conditions.

  • The contractual nature of a purchase order protects both the buyer and the supplier in case of a dispute about the nature of the order; a great PO leaves no questions unanswered.

  • For purchasing agents, the purchase order helps to manage incoming and pending orders from inventory and shipping management, to invoicing and forecasting. (To the point where the order fulfillment process can be virtually automated when a PO is accepted if you use a tool like OfficeBooks.)

  • If your ordering system is disorganized, implementing purchase orders can provide a standardized purchasing process that can make your entire system more accountable and predictable.

  • An integrated purchase order system can be linked to your product inventory and shipping, providing up-to-date information about availability and preventing inventory shortages. (Even low inventory thresholds can be set and reorder notifications triggered automatically with PO management systems like OfficeBooks.)

Capture every detail of the sale in your
Purchase Order for clarity on all sides.
The more detailed and explicit your purchase order is, the better informed your customer is on how the order will proceed. Internally, a purchase order can be a guide to coordinate sales, inventory and shipping teams, and deliver the correct items without any unnecessary delays. If you’re using simple spreadsheets to coordinate orders you know that data can get lost, saved over and is often inaccessible with only a few people having access. Making the change to an automated, central purchase order and inventory tracking system can have a huge impact on the efficiency and profitability of your business.

What do you like to see on a purchase order? What details help in setting proper expectations and fulfilling an accurate and efficient sale? Tell us in the comments!