Purchase orders have been effectively used by businesses for a long time. A purchase order is a legal commercial document used to buy goods or services of all types. It is simply a specific list of what a buyer wants to purchase from a seller. 

Steps in Using a Purchase Order 

Typically, the steps are initiated internally with an individual who creates a purchase requisition. Once approval is secured internally to buy something, the buyer creates a purchase order. The PO is submitted to the seller who can accept or reject the document. The buyer records the purchase order, and it remains open until the order is fulfilled. When the goods or services are delivered, the supplier will send a sales invoice. The buyer pays the invoice, and the transaction is completed. 

Benefits of a Purchase Order 

The benefits include: 

• Enhanced operational efficiency. It avoids duplicate orders so there is no duplication of payment and no duplication of unnecessary inventory. Further, if a buyer orders similar products, a purchase order keeps the orders separately. A PO also provides a way to track invoices to be paid. It also keeps track of incoming orders which helps simplify inventory and shipping processes.  

• It serves as a legal document that will help avoid any disputes regarding a transaction.  

• It provides better information that can be more easily accessible.  

• It facilitates budget planning and control.  

• It helps reduce fraud by better documenting orders and pricing.   

Purchase Order Mistakes to Avoid 

To get the best benefit of using purchase orders, it is important to avoid these mistakes: 

• Using an incorrect name for the buyer or seller.  

• Not being specific regarding details of the purchase.  

• Having conflicting terms within the order.  

• Not specifying terms or conditions or not including those terms and conditions in the PO document.  

• Ignoring seller concerns and communication.   

Seek Expert Financing Assistance 

Contact Gipson Commercial Solutions for the expert financing assistance you need to meet your business goals. We provide a wide range of tailored financial solutions.