Clients often ask why they should use Purchase Orders. They are typically used when the vendor delivers or ships the purchased items prior to payment, when the purchase order provides risk protection. Also, Purchase Order records help to monitor and document expenditures and allow vendors to track payments. Here are a few reasons to implement Purchase Orders into your process.
P.O.’s Provide Details
Although purchases can be documented with basic expense records, purchase orders provide more details. Information on a Purchase Order should include the name and address for both your company and the vendor, delivery address (or details of electronic delivery), Purchase Order number, issue and delivery dates, details of purchase, terms and conditions and any other information on the purchase.
P.O.’s Document Project Expenses
In addition to providing details, Purchase Order records can be tracked and their data can be used in project management reporting. In the event of an audit, they offer supporting documentation for expenses.
P.O.’s Lower Risk of Misunderstanding
When all details are completed in a Purchase Order, both you and your vendor should be clear on what is being purchased, delivery deadlines and payment terms. By clarifying details, you can avoid potential conflict or confusion. They are the best way to ensure everyone is on the same page.
P.O.’s Support an Approval Process
Purchase approvals are necessary when controlling expenses. Requiring approval from authorized employees ensures expenses are within budget.
Prevent Duplicate Purchases and Payments
No business wants duplicate orders for goods and services they don’t need. By tracking the internal status of purchase orders, duplicate orders can be avoided. When vendor invoices are matched with Purchase Orders, duplicate payments are prevented.
Purchase orders act as a Legally Binding Document
In the event of a dispute, the purchase order serves as a verifiable record that either you or the vendor can use to reference details of the transaction. This is much more reliable than an email thread or verbal purchase.
Automate your Purchase Order Process
When implementing the use of Purchase Orders, it’s important to make it as efficient as possible. Avoid using a paper-based system, which could result in errors, lost documents and manual reporting. An automated purchase order system is integrated with accounts payable. When everything is in a single system, it becomes easier to match orders with vendor invoices for faster payment processing.
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