A purchase order (PO) is a legal document between the seller and buyer that gives specific details about goods or services to be delivered, such as delivery date, price and other terms and conditions.
On request from the department in need of raw materials, the approver enacts the purchase order process by approving the order.
Following approval, the PO is sent back to the requisitioner or the department responsible and then to the supplier.
Purchase orders become legally binding documents once the supplier accepts them and declares the items, price, delivery expectations, and payment terms.
It is a complete cycle observed in large companies with an organized structure. A purchase order may also be issued without approval if the business's procurement process does not require it.
In order to issue a Purchase order, we should take into account the details such as:
A business's order process may vary depending on its goods or services, and occasionally, a company may follow a different approach for different orders.
However, the general form of the Purchase Order flow is as follows:
This illustration will help you understand the comprehensive Purchase Order flow more clearly.
A purchase order number provides details of what items are ordered, the quantities, the date of receipt, etc. Upon receipt of the goods, the purchase order's details are tracked either on the receipt note or on the purchase invoice.
Afterwards, the purchase invoice is matched with the payment made to the supplier. Using accounting software, most companies record and account for transactions automatically.
It provides detailed order status reports as well as complete tracking of purchase order transactions. By doing so, the business will be able to track how quickly the ordered stock items arrive and whether they are delivered on time.
We create this table for you to see the differences between purchase orders and purchase invoices much more easily and clearly.