What is Purchase Order (PO)? To run the company’s operations, of course, it requires several things in order to achieve the targets that have been determined. One thing that needs to be done is to carry out the procurement process.
Procurement or commonly referred to as purchasing is a process of purchasing goods carried out as a form of money circulation and investment made by companies. When making a procurement, the company will certainly deal directly with many transactions. The transaction usually involves a document called a Purchase Order.
Well, this time we will discuss further, starting from what is the purchase order, benefits and functions and others about the purchase order below.
Definition of Purchase Order
A purchase order or PO is a document created by the buyer to show the goods they want to buy from the seller. The PO is also a contract formed as an agreement between the buyer and seller related to the item to be purchased. If the invoice made by the seller and then sent to the buyer, while the PO comes from the buyer and sent to the seller.
This purchase order usually contains information such as company details, date of order, details of goods or products that the buyer wants to buy. In addition, there is information such as the name of the item, the price of the item and other provisions. So this purchase order is a request for goods whose quantity and price are listed by the buyer.
After the PO is created, it will be sent directly to the seller. Then after that, the seller will see the PO and consider whether to accept the offer from the buyer or not. If the PO has been received, then the seller has agreed to sell it from the amount that has been listed and determined by the buyer. After that, the seller issues an invoice to the buyer according to the purchase order.
Sometimes many people have the notion that the process of using POs is quite complicated, even though by making the transaction process using this system the transaction will certainly be safer and reduce the existing risks.
Who Make Purchase Order?
The Purchase Order document is created by the buyer himself. If in the context of the company, staff from the purchasing department is the one who arranges and regulates the process of purchasing an item or service.
However, there are several companies that rely on 3rd party services to manage Financial Purchase Orders.
Benefits of Purchase Orders
Apparently, there are still many companies that are not interested in using POs or Purchase Orders. Because they consider this document troublesome or slow down transactions.
They also usually do not want to use it, because they feel they already have a very close relationship with their vendor or supplier.
This purchase order is very important to you because this document contains complete information about your order. This document is also very useful especially if you order different items in large quantities.
Basically, PO acts as your contract with the supplier as well as a reference point when there are problems that arise, for example, the number of orders that are not appropriate, you can easily ask for or claim.
Every document or form used by the company certainly has different benefits. The following are number of benefits offered by Purchase Order for the company:
Avoid the possibility of fraud
When ordering from a supplier, the process can be shorter because we can order it directly. However, this will be a bit risky because of the possibility of fraud, especially if the ordering system is not in accordance with the SOP.
This is different from ordering goods using a Purchase Order in which the process is carried out will be safer and can avoid the risk of fraud, so as to minimize losses that can be experienced by the company.
Determine the Appropriate Price
As a buyer who determines the price and you submit it to the seller. If the seller agrees with the price and the item you are proposing, then this can be more profitable for the company.
In fact, if you place an order and purchase through a Purchase Order in a larger amount, you will usually also get a cheaper discount. This can make the company more efficient in terms of spending.
Securing the Availability of Goods
Making a purchase using this Purchase Order can help you secure the items you want to buy. Because when submitting a Purchase Order, of course, the seller will ensure the availability of the items you want and of course will save them to be sent at the specified time.
The explanation above certainly makes you more or less understand what a Purchase Order is, right? Therefore, make sure your company uses the PO system when making the transaction process to make it more secure. This Purchase Order can also be used as collateral for loan applications on several loan application platforms, so optimize your transaction using the Purchase Order system.
Sample Purchase Order (PO)
In purchase orders usually have a few details such as:
- The name of the product or item you want to order
- The quantity of each product or item ordered
- The price of each product or item ordered
- The total price is in accordance with the price per unit and quantity ordered
- Tax that has been stated
- Purchase order number
- Transaction date and payment due date
- Authorization column
Get Free Word Purchase Order Templates Sample!
Click the button below and get an example of a free purchase order word and excel that can be used directly for corporate and personal needs.
The above sample has some of PO components that are commonly found on purchase orders document.
Along with the times and technology that makes it easier for the public to conduct transactions, therefore make PO have more benefits, one of them by utilizing POs as collateral for applying for business capital loans.