- A Purchase Order(PO) is commercial document and first official offer issued by a buyer to a seller,indicating types, quantities, and agreed prices for products or services.
- It is used to control the purchasing of products and services from external suppliers.
- Purchase Order contains PO number, date, vendor details, shipping details, item, quantity and unit price.
- One time commitment to purchase goods or services.
- This type of Purchase Order is most widely used.
- Purchase Order is made when all the key details such as the specific item(s) to be purchased, the quantity, the price, the delivery schedule, and payment terms are known.
- Long term agreement to buy goods/services.
- For this purchase order, most details are known: items, quantity, price, and payment terms, but the exact delivery schedules are not yet known.
- By using this purchase order you are committing to price and quantity etc,but you only make a tentative delivery schedule.
- Planned PO look exactly like a Standard PO.
- With a BPO, the situation is the same as a PPO, except price and quantity are not known either.
- You will still specify which item you want on certain delivery terms, but nothing further until you make a release against the BPO.
- Typically you will agree a maximum quantity for a specified period, and then order any amount beneath this quantity
- You may agree price breaks that depend on quantity purchased.
- For this type of purchase order the specific item needed is not known.
- You may agree on terms and conditions with your supplier, but nothing further until the items and quantities that you want are known.
- SPOs are created by referring to the CPO when something is to be purchased against the CPO from that supplier.
- Suppliers are authorised to ship through Standard PO lines giving reference of the Contract Agreement
- Purchase orders allow buyers to clearly and explicitly communicate there intentions to sellers.
- Sellers are protected in case of buyer's refusal to pay for goods or services.
- Purchase order helps a purchasing agent to manage incoming orders and pending orders.
- Purchase orders provide economies in that they streamline the purchasing process to a standard procedure.
Purchase Order example :
