- Purchase order is a document given by a customer / buyer to a seller with a order request.
- Purchase order document contains the "Item Name", "Item Type","Item Quantity","Item Price for products or services","Terms and Conditions".
- After accepting the purchase order by seller contract will be form between customer and seller.
Purchase Order Types :
- Standard Purchase Order.
- Blanket Purchase Order.
- Contract Purchase Order.
- Planned Purchase Order.
1.Standard Purchase Order :
- Create standard purchase orders for one-time purchase of various items.
- Standard purchase orders will create when we know the details of the goods or services you require, estimated costs, quantities, delivery schedules, and accounting distributions. If you use encumbrance accounting.
2.Blanket Purchase Order :
- Create standard purchase orders for one-time purchase of various items.
- Standard purchase orders will create when we know the details of the goods or services you require, estimated costs, quantities, delivery schedules, and accounting distributions. If you use encumbrance accounting.
- We create the blanket purchase order when we want purchase the goods long time from supplier.
- Blanket purchase order will create when we know the detail of the goods or services we plan to buy from a specific supplier in a period, but you do not yet know the detail of your delivery schedules.
- We can negotiate the prices of the products before selling the products in blanket purchase order.
3.Contract Purchase Order :
- We can create contract purchase agreements with your suppliers to agree on specific terms and conditions without indicating the goods and services that you will be purchasing.
4.Planned Purchase Order :
- A planned purchase order is a long-term agreement committing to buy items or services from a single source.
- You must specify tentative delivery schedules and all details for goods or services that you want to buy, including charge account, quantities, and estimated cost.
Rules / Content : | Standard Purchase Order | Planned Purchase Order | Blanket Purchase Order | Contract Purchase Order |
Terms and Conditions Known | YES | YES | YES | YES |
Goods or Services known | YES | YES | YES | NO |
Prices known | YES | YES | MAY BE | NO |
Quality known | YES | YES | NO | NO |
Account Distribution known | YES | YES | NO | NO |
Delivery schedule Known | YES | MAY BE | NO | NO |
Reasons To Use Purchase Order :
- Purchase order allows the customers to clearly and explicitly communicate their intentions to sellers.
- Sellers are protected from the fraud customers. i.e,In case a customer refuse to pay for received goods.
- Purchase order helps to purchasing agent to manage the incoming orders and purchase orders.
Difference Between Purchase Order and Invoice :
Purchase Order | Invoice |
It is issued by the buyer to the seller. | It is issued by the seller to the buyer. |
Used for ordering the goods / services from the seller. | This document shows the payment of goods sold. |
A Purchase Order is generated before generating the Invoice. | An Invoice is generated after generating the Purchase Order. |
Defines t he Contract of sale. | Marks the confirmation of the sale. |
Purchase Order Fields and Explanation :
Fields
|
Usage
|
From Address
|
It consists of the address from the buyers side.
|
To Address
|
Where the orders has to be collect.
|
Date
|
The purchase order prepared date.
|
PO Number
|
It is the no of purchase order.
|
Shipping Date
|
When the purchase order is shipped to the sale officer.
|
Terms and Conditions
|
Rules or note points to the seller.
|
Quantity
|
No of items need for an particular product.
|
Description
|
Detail information of the product/Item.
|
Unit Price
|
Cost of the single product.
|
Payment Terms
|
Amount payable days if the inventory get collected.
|
Amount
|
Total price of the Single Product using discount.
|
Prepared By
|
It is the purchase order prepared person signature.
|
Uses of Purchase Order :
- A properly managed purchase order system will quickly tell you what’s been ordered, shipped and received but not invoiced and so on.
- PO's in the system will help prevent ordering more of an item than you may need.
- You can also match the delivered goods against what was ordered, to prevent wrong delivery.
- The buyer pays the invoice according to the terms laid out in the PO.