In business, it is good practice to put
agreements in writing to avoid misunderstanding. A
Purchase Order (or PO) is an agreement between you and
your vendor setting forth the terms for the purchase of goods
or services. Even if you verbally order product,
its a good idea to record the PO so that you know what
products are 'On Order' and don't duplicate orders.
In terms of general information a PO should a
numerically sequenced PO numbers, order and expected
ship dates, bill to and ship to addresses.
Ship to address is especially important if you have multiple
locations, drop ship or ship to sub-contractors.
POs may have a shipping method and
FOB. FOB means 'Freight-on-Board' which in indicates
when legal ownership of the goods are transferred. For
national shipments, FOB is usually customer warehouse.
For imports, it could be vendor warehouse which means the
goods become yours (for insurances purposes) when they leave
the vendor's doc.
Most importantly, the PO will list codes, descriptions, quantity and price of
products and services ordered.
Finally, a person authorized to make purchase should sign the Po. You should
inform your vendor who in your company is authorized to make purchases.
A copy of the PO should be kept in receiving and accounting (Electronically or
otherwise). When goods are received, codes and quantities are compared to
the PO. You may want to instruct receiving not to accept shipments without a PO
unless approved. In accounting, the PO and receiving document's quantity,
codes and prices are compared to the vendor bill. Any differences should be
reported to the vendor in writing.
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