A purchase order is a documentation that is required when a merchandise buys goods or services. A purchase order is a document that is issued by the buyer to the seller. The purchase order is an official document committing to pay the seller for the purchase of the product or service which will be delivered in the future. So two main parties are the buyer and the seller, and they start to negotiate about the type, volume, price, and delivery date.A purchase order is first started with a requisition and then the purchase order is requesting approval from the seller to proceed with the order after the approval the purchase order becomes a legal document between the seller and the buyer. The pros of a purchase order are the buyer will be able to place an order with immediate payment but after the delivery, he is obligated to pay. The purchase order is a good way to track because they have a unique number. Also see: what is po

What is on the PO?

Like any other commercial contract. It’s crucial to put in as many details as possible on your PO.

You may include details such as :

• Name of each item
• Quality of each item
• Price of item
• Stock keeping unit ( SKU) codes
• Unique purchase order number
• Delivery date
• Names of the buyer and seller
• Contact details of the buyer and seller
• Billing address
• Payment terms
• Brand names

How is a purchase order used?

A purchase order eases the purchase process; they are useful documents and the PO creates a legally binding contract.

Some importance of how a purchase order is used:

• When the buyer decides to purchase a product or service

• The buyer request the product or service with the purchase order from the seller

• Nowadays the PO are electronically generated

• Once the seller receives the PO he/she has to approve and then it becomes a legally binding contract. ( If the seller doesn’t want to provide the product or service the PO is canceled. )

• After the approval, the seller begins to prepare the order.

• PO is a useful document you will be able to track and know what order is delivered

• After the delivery, the seller invoices the order with the help of the PO’s unique number to track and record the details.

• The buyer is obligated to pay because it’s a legally binding contract.

Pros and cons

Pros

• Improves inventory and financial management accuracy because the details are recorded

• Budgeting is improved because the buyer has to mention the credit and budget of the purchase.

• Purchase order helps to deliver on time because they are scheduled and able to track.

• The purchase order is a legally binding contract between the seller and the buyer.

Cons

• Unnecessary paperwork is required for small entrepreneurs or businesses to fill

• The same details are mentioned in credit card forms so it’s double work.

Conclusion

A purchase order serves to bring accuracy and order to the transaction and aids in the future order tracking. However, the seller must first authorize it before it can be considered a legally binding contract.