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What is the main purpose of a Purchase order?

We all know that when doing a business, stock or inventory is purchased from time to time according to the needs of the business. You are not at complete ease that once you have bought the inventory that now there will be no need ln the future. Plus buying or stocking in bulk also creates overstocking problems for your business which later eats up all the profit of your company. However, it is undoubtedly very important to keep a record of all the purchases of your business in order to avoid any confusion in the future. Purchase order management will help you track and store all your orders from time to time so that you know what is sold and what else is to be purchased.

Furthermore, for organized purchase order management, you must formulate an effective set of plans that includes how to manage the purchases, monitor them, and keep all the records so the duplication of orders is also prevented. Using inventory management software like Inventooly could help you to a great extent because all the operations are being monitored digitally. It also helps you to save time and also get your work done without errors.

Purchase Order:

A purchase order can be simply defined as a legal document that entails all the goods that are required to be purchased by the buyer from the seller. It is sent to the supplier for informing him regarding the goods needed within a specific time period. It is very essential to make a purchase order as a contract with your supplier so that you have the entire record of all your buyings that can be checked for later use.

It is very crucial that you have all the records of your sales as well as purchases of your business so you can avoid arguments with your officials as well as the suppliers when the audit is being conducted. It is a legal document created and issued by the buyer so they can register in the purchase order management and also to recall the supplier for future purposes.

Difference between a Purchase and Sales order:

Many people confuse the purchase and sales orders as the same ones, but they are totally opposite to each other. The purchase order is made and issued by the buyer to the seller listing the products, their quantities, and sizes also mentioned in it to avoid any uncertainty. Whereas the sales order is been given by the seller to the buyer about the things that he had sold to him so that later he could have the record of his sales at the end of the accounting period.

In addition to this, it is very crucial for the seller as well as the buyer as well that he records the purchase to keep in check the cash balance of his business. It is very unfortunate when there are distorted records lying in the company at the time of audit and checking about the profit as well as the loss of business. Here purchase order management comes in hand, and all this can be done without any difficulty by using an inventory management software like Inventooly. It enables you to keep the check-in balance of the cash that is going out in terms of purchases and the revenue that is earned in terms of sales as well.

Purpose of a purchase order:

The primary purpose of a purchase order is to buy goods directed in it by the buyer towards the seller. Issuing a purchase order helps you to official your purchases and fulfill the requirements on a legal basis. Once it is issued, all your future obligations in terms of any risk are eradicated. You can understand the purpose of the purchase order by digging into its process of working into the business.

  • Purchase requisition:

A businessman or an official himself knows what are the requirements of the business, what do you need, and how you will get it. Likewise, when the goods are to be ordered by the buyer, he makes a purchase requisition on behalf of the business. In this document, all the things relevant to the product are stated like when it is needed, why it is needed, in what size it should be delivered, and what should be the quantity as well.

Once a purchase requisition is made, it is further moved towards a staff official who will approve it for forwarding to the supplier. If he sees any mistake or rises any query, alterations should be made right away, otherwise, it is approved and forwarded to the supplier.

  • Purchase Order is issued:

When a purchase requisition is approved, it becomes a legal purchase order that is sent to the supplier for the delivery of goods. When the supplier receives it and accepts to deliver the goods, it becomes a kind of contract between the vendor and the buyer. Now it is the responsibility of the supplier to deliver goods to the business according to those stated in the purchase order.

In addition to this, the purchase order management system also works conveniently when the supplier issues a receipt and tracking number that he has allocated to the goods required by the buyer. It eliminates confusion at the time of shipment as the tracking ID is written above the delivery boxes so you can recognize easily what is yours.

  • Order completion:

Once the order is completed and shipped by the supplier to the buyer. Before this, a document or a digitally sent email is sent to the purchaser about their goods that are in transit and when to expect them delivered.

  • Shipment arrival:

As we all know that the shipment when arrives is in the form of boxes. If you have made a large number of orders, it is possible that your stuff will be delivered in portions. But the receipt given to you in exchange for a purchase order will help you to make sure that the correct order is being delivered as stated in the PO given by you to the vendor.

  • Processing of invoices:

Once the surety is being obtained regarding the products that are yours and match with the purchase order. You can now forward the invoices to the accounts payable and clear out all your payments regarding the products ordered.

Furthermore, all your purchases can be recorded from time to time if you utilize an automated system like Inventooly to manage the inventory of your business more effectively. It will not only save your time but also guarantee you to provide results errorlessly.

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