When a business wishes to purchase some goods from a supplier it will usually send a completed Purchase Order form to them. This should provide the supplier with all the information they require to arrange for the correct goods to be supplied.
Purchase Order forms provide benefits to both the buyer and seller as they are a permanent record of the orders made or received as:
- They reduce the risk that there will be confusion or a disagreement over the type and quantity of goods ordered
- They make it easier for the buyer to check that the correct type and quantity of goods are received from the supplier
- They make it easier for the businesses to keep track of unfulfilled orders
Quotations and Price lists
When ordering goods from a supplier, a business’ Purchasing Department should check the amounts they will be charged for the goods. Typically this will involve checking the supplier’s price list and ensuring that any relevant discounts will be available, or where a price list is unavailable, a quotation will be obtained from the supplier. A quotation, or quote, will provide the amount that will be charged or, alternatively, the basis on which the amount to be billed will be calculated. This is done to ensure that the business does not receive any surprisingly large bills.
Contents of a Purchase Order
A Purchase Order form should provide all the necessary information required to ensure that the supplier knows exactly who is making the order, what is being ordered and how, where and when the order should be fulfilled. To achieve this the Purchase Order should include:
- The name and contact details of the business ordering the goods and details of the business to whom the order is being sent
- Confirmation that the document is a Purchase Order (this is important as there are several documents that include similar information to a Purchase Order and its important to avoid any confusion)
- The date the order is made as well as the name or reference of whoever has made the order
- A unique Purchase Order reference
- Details of type and quantity of goods being ordered (many businesses will also include the amounts to be charged for the items)
- Additional information about where and when delivery of the goods should be made
Once completed, copies of the Purchase Order will be sent to the supplier, as well as the business’ Purchasing Department (so that they can keep track of all purchases), its Goods Inwards or Stores Department (so that they know what goods to expect and can also check that the goods received agree to the goods ordered) and to its Accounting Department (who can check that the right goods are subsequently invoiced for by the supplier).
