A purchase order template is used by a buyer to create the list of specific items he/she wants to purchase from a seller. It usually includes the types of goods/service, their quantities, and prices. The buyer should include as many details as possible in order to make a more effective purchase order.
When the seller receives the document, he decides whether or not to accept the document. However, if he signs it then this document serves as a legal binding document between the buyer and the seller. After that, the seller has to sell all the items according to the quantities, prices, and any other requirement dictated by the document.
Each order has a unique purchase order number you should also note down it. Also, for tracking the delivery and payment, this number is useful.
How does a purchase order work?
Let us discuss step-by-step that how the purchase order works;
- At first, the buyer decides to purchase goods/services. Buyer should also specify that which products and their quantity are required.
- From the first step, the buyer writes an inclusive purchase order. After writing, he then decides either sends it electronically or via postal address. You can also mention the time that when you would want feedback approval from the seller.
- Once receiving the order, the seller reviews the request. Then, he checks whether he is able to fulfill it. If the seller is able to meet the requirements then he approves the order and notifies the buyer. After confirming the order, the document legally binds both the seller and the buyer.
- The seller is responsible for providing the services or products listed by the buyer after approving the order. Then, as per the agreement, the seller ships the good to the buyer. The seller also creates an invoice and sends it along with the goods.
- In the final stage, the buyer pays the invoice as per the agreed terms.
What to include in a purchase order?
A standard purchase order includes the following information;
- The type of goods/services purchased
- The quantity of goods/services
- The amount of each item purchased
- The specific brand names
- The model numbers of items needed
- The delivery date
- The address of buyer
- The billing address
- Terms and conditions of payment
Why purchase order is needed?
Due to the purchase order, the developed businesses enjoy a positive and steady working relationship with their suppliers. The small-scale businesses don’t require purchase order because of their simple purchasing habits. As the business grows, the purchase process increases and then they realize the importance of having purchase order. Also, with such growth, demanding purchases become uncontrolled. At the same time, your level of communication also increases with your seller. Therefore, you should use a purchase order to avoid errors. The seller only ships the goods when he has a purchase order number as a reference. This makes transactions easy, relevant, and transparent.
Managing purchase orders:
Sometimes, the management of purchase order can be challenging. Here are some useful tips for you to avoid such difficulties;
- When you buy goods in bulk then you may have opportunity of benefiting from preferential item pricing. You can also purchase goods at a lower cost per unit. If you are confident to sell the entire merchandise then you should only go for this option.
- You should always send your purchase orders and invoices in a timely manner. This indicates your seller that you are predictable, trustworthy, and professional. In this way, they feel confident while working with you.
In conclusion, a purchase order template is easy to use and provides legal protection to both the buyers and suppliers. For buyers, this document ensures that the supplies are made without any errors. For sellers, it makes sure that the buyer will pay for the bought items in a timely manner.