Tuesday, September 13, 2016

Purchase Order

  • 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 :

  1. Standard Purchase Order.
  2. Blanket Purchase Order.
  3. Contract Purchase Order.
  4. 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 :

  • 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.

Examples for Purchase Order :