Purchase order (PO) – what is it?
A purchase order, also known as a Purchase Order (PO), is a formal document issued by a buyer to order goods or services from a supplier. The purchase order serves as a purchase commitment that specifies all the details of the transaction, such as the quantity ordered, unit price, payment terms, delivery date and other specific requirements of the buyer. The PO is an important part of the purchasing process that helps manage supplier relationships and control costs.
A purchase order is a legally binding document, which means that once it is accepted by the supplier, it becomes a contract for the supply of goods or services. It is also a control tool that allows tracking all stages of an order, from its issuance to final delivery and payment. This allows companies to effectively manage their purchases, minimize the risk of mistakes and ensure that orders are in line with expectations.
In practice, purchase orders are used in a variety of industries, from manufacturing to retail, where tracking the flow of goods and ensuring continuity of supply is required. Purchase orders can be placed on paper or electronically, with the increasing use of ERP systems that automate the PO issuance and monitoring process, resulting in increased operational efficiency.
Frequently asked questions
1. What is a purchase order (PO)?
A purchase order (PO) is a formal document issued by a buyer to order goods or services from a supplier, containing order details such as quantity, price, delivery date and payment terms.
2. What elements should be included in a purchase order?
The purchase order should contain such elements as a description of the goods or services, quantity, unit price, payment terms, delivery date, contact information of the buyer and the supplier.
3. What are the benefits of issuing purchase orders?
Issuing purchase orders allows you to control costs, manage relationships with suppliers and minimize the risk of mistakes. The PO also represents a formal commitment by the supplier to deliver goods or services according to the agreed terms.
4. How does a purchase order become a binding contract?
A purchase order becomes a binding contract when it is accepted by the supplier. From that point on, both parties are bound to the agreed terms, such as delivery date or price.
