Understanding Purchase Orders and Their Benefits for Business

Rancakmedia.com – Do you know the meaning of Purchase Order or PO? Purchase order or PO means a document created to indicate the goods you want to purchase. Only in this article will you find the complete function and explanation.

In business, there are many purchasing transactions carried out, and having a Purchase Order can ensure that the procurement process runs smoothly and is structured.

Purchase Order is a term commonly used in business. This is because Purchase Orders play an important role in the process of procuring goods or services for business purposes.

Understanding Purchase Orders

A Purchase Order or Purchase Order is an official document containing a request to purchase goods or services from the seller by the buyer.

This document contains detailed information about product or service purchased, including quantity, price, delivery schedule, and payment terms.

The main purpose of a Purchase Order is to ensure that the procurement of goods or services is carried out in a structured and controlled manner, so as to avoid errors in ordering and sending products or services that do not match the order.

Apart from that, Purchase Orders can also make it easier for buyers to track the status of delivery of goods or services and ensure that payments are made in accordance with predetermined agreements.

The difference between a Purchase Order and an Invoice is that a Purchase Order is a purchase request from the buyer, while an Invoice is a payment request from the seller after the goods or services have been received by the buyer.

Types of Purchase Orders

There are several types of Purchase Orders that can be used in business, including:

1. Standard Purchase Order

Standard Purchase Order is a type of Purchase Order that is commonly used in business. This document contains a general purchase request for goods or services without too detailed specifications.

Standard Purchase Orders are often used to procure goods or services that are purchased periodically and in small quantities.

2. Purchase Order Blankets

Blanket Purchase Order is a type of Purchase Order made to procure goods or services in large quantities and for a long time. Purchase Order Blankets are usually used to procure goods or services that are expensive and difficult to find.

3. Reserve Purchase Order

Reserve Purchase Order is a type of Purchase Order created to meet an unexpected need for goods or services. This document was created as a backup and will be used if needed at any time.

4. Spot Purchase Orders

Spot Purchase Order is a type of Purchase Order made for sudden and emergency procurement of goods or services.

This document contains a purchase request for goods or services that require immediate delivery, usually within 24 hours.

Purchase Order Creation Process

The process of creating a Purchase Order can be carried out using the following steps:

1. Identify Needs

The first step in creating a Purchase Order is identifying the need for goods or services needed by the business.

This can be done through communication between the buyer and the party who needs the goods or services.

2. Vendor Selection

Once the need for goods or services is identified, the next step is to select a vendor who will meet that need.

The selected vendor must be able to provide goods or services that meet the desired specifications and have a good reputation.

3. Price Offer

After the vendor is selected, the buyer can request a price quote from the vendor concerned.

This price quote must include price details, including shipping costs and delivery time for goods or services.

4. Making Purchase Orders

Once the price is agreed, the buyer can create a Purchase Order which contains details about the goods or services to be purchased, including quantity, price, delivery schedule and payment terms.

5. Verification and Approval

The Purchase Order that has been created must be verified and approved by the authorized party at the company. This is important to ensure that the Purchase Order is in accordance with company policy and the available budget.

6. Delivery of Purchase Orders

Once the Purchase Order is approved, the document must be sent to the vendor who will fulfill the order. The vendor will process orders and deliver goods or services according to the agreed conditions.

7. Receipt of Goods or Services

After the goods or services are received, the buyer must check and ensure that the goods or services received are in accordance with the Purchase Order. If there is a problem or discrepancy, the purchaser must immediately contact the vendor to correct the situation.

An effective Purchase Order creation process can help businesses save time and costs, as well as ensure that the procurement of goods or services is carried out in a structured and controlled manner.

How to Track a Purchase Order

Tracking Purchase Orders is one of the important things that buyers must do to ensure that the procurement of goods or services has been carried out correctly.

Here are several ways to track Purchase Orders:

1. Using an ERP system

An ERP (Enterprise Resource Planning) system can help monitor Purchase Orders from start to finish.

In an ERP system, each Purchase Order has a unique number that allows buyers to track purchase status in real-time.

2. Contact Vendors

Buyers can contact vendors to obtain information about the delivery status of goods or services they have purchased.

The vendor will provide information about the delivery date, delivery receipt number, and estimated time of arrival.

3. Using Email

Buyers can use email to request updates on purchase status. The email must include the Purchase Order number and details about the goods or services that have been purchased.

4. Using a Delivery Tracking Application

Some vendors provide shipping tracking applications that allow buyers to track shipping status online. These applications can usually be accessed via the vendor's website or via a mobile application.

Example of Purchase Order

The following is an example of a Purchase Order that can be used as a reference in creating this document:

Purchase Order Number: 12345678
Creation Date: May 1, 2023
Buyer: PT. A B C
Vendor: PT. XYZ

Description of Goods or Services:

1. 50 units of Acer brand laptops
2. 10 HP brand printer units
3. 5 Canon brand scanner units

Goods or Services Specifications:

• Acer laptop with Intel Core i5 specifications, 8GB RAM and 1TB hard drive
• HP printer with color and black and white printing specifications, printing speed of 20 sheets per minute, and Wi-Fi connectivity
• Canon scanner with resolution specifications of 1200 x 2400 dpi and scan speed of 10 seconds per sheet

Price:

1. Acer laptop for IDR 10,000,000 per unit
2. HP printer Rp. 2,000,000 per unit
3. Canon scanner for IDR 1,500,000 per unit
4. Total Price: IDR 600,000,000

Delivery Schedule:

• 25 laptop units, 5 printer units and 3 scanner units will be sent on May 15 2023
• 25 laptop units and 5 printer units will be sent on May 30 2023
• 22 laptop units, 5 printer units and 2 scanner units will be sent on June 15 2023

Payment Terms:

1. 50% of the total price must be paid before delivery of the goods
2. 50% the remainder is paid after the goods are received and verified by PT. A B C

In the Purchase Order example above, there is detailed information about the goods or services purchased, their specifications, price, delivery schedule, and payment terms.

This document was created to ensure that the procurement of goods or services is carried out in a structured and controlled manner.

Benefits of Using Purchase Orders

Using Purchase Orders provides many benefits for companies. The following are some of the benefits of using Purchase Orders:

1. Manage Financial Expenditures

With a Purchase Order, the company can manage expenses finance with more control. This document can help companies create a more structured budget and reduce the risk of budget overruns.

2. Speed up the purchasing process

Purchase Order documents can speed up the purchasing process. In this document, there are details of the goods or services purchased, their specifications, prices, and delivery schedules.

With this information, companies can make purchasing decisions more quickly.

3. Prevent ordering errors

Purchase Order documents can help prevent ordering errors. In this document, there are details about the goods or services purchased and their specifications.

With this information, companies can ensure that the goods or services purchased are in accordance with the company's needs.

4. Makes it easier to track goods or services

Purchase Order documents can make it easier to track goods or services. In this document, there is a clear delivery schedule and a unique Purchase Order number.

With this information, companies can track purchasing status in real-time.

5. Increase cooperation with vendors

Purchase Order documents can improve collaboration with vendors. In this document, there are details about the goods or services purchased, their specifications, prices, and delivery schedules.

With this information, vendors can better prepare the goods or services purchased and deliver according to the agreed schedule.

In business, the use of Purchase Order documents is very important to organize the procurement of goods or services in a structured and controlled manner.

This can help companies reduce the risk of budget overruns, prevent ordering errors, and make it easier to track goods or services.

Conclusion

A Purchase Order or Purchase Order is an official document containing a request to purchase goods or services from the seller by the buyer.

That is the information about the meaning of purchase orders and their benefits for business. I hope the article above can be useful and helpful for all of you.