A purchase order (PO) is a critical document in procurement, formalising the agreement between a buyer and a supplier. It clearly defines what the buyer intends to purchase, including quantities, prices, and delivery terms. Here’s a breakdown of how to create a purchase order.
How To Create a Purchase Order
1. Identify the Need
The first step is recognising the need for specific products or services within your business. This might stem from inventory shortages, upcoming projects, or regular restocking requirements. Once identified, the specifics such as quantity, quality, and timelines are determined to ensure the correct items are procured.
2. Select a Supplier
After identifying what is needed, the next step is to select a supplier who can fulfil the order. The choice should be based on factors like reliability, cost, and the quality of goods or services offered. Researching and evaluating potential suppliers is crucial to ensure they meet your business’ standards and can deliver on time.
Watch our video round-up below:
3. Negotiate Terms
Before finalising the purchase order, it’s essential to negotiate the terms with the chosen supplier. This includes agreeing on the price, payment terms, delivery schedule, and any other conditions relevant to the transaction. Effective negotiation ensures that both parties are clear on expectations and reduces the likelihood of misunderstandings later on.
4. Create the Purchase Order
With terms agreed upon, the next step is to draft the purchase order. This document should include all pertinent details such as item descriptions, quantities, agreed-upon prices, delivery instructions, and payment terms. Using a standardised template or an automated purchase order system can help in accurately capturing all necessary information and streamlining the process.
5. Review and Approve
Before sending the purchase order to the supplier, it’s important to review it thoroughly. This review ensures that all details are correct and that the order complies with company policies and procurement standards. Once verified, the purchase order is typically approved by an authorised individual within the business, ensuring that the order can proceed.
6. Send to Supplier
After approval, the purchase order is sent to the supplier, marking the formal request for the goods or services. It’s important to confirm that the supplier has received the order and understands all the details. Clear communication at this stage helps prevent any discrepancies in the order fulfilment process.
7. Track and Manage
Once the purchase order is sent, the final step is to track the order until it is fulfilled. This involves monitoring the supplier’s progress, ensuring that delivery schedules are met, and resolving any issues that may arise during the process. Proper tracking and management ensure that the goods or services are received as expected and that the transaction is completed smoothly.
Conclusion
Creating a purchase order is a straightforward but essential process in procurement. By following these steps, businesses can ensure clear communication with suppliers, reduce errors, and streamline their purchasing operations.
Learn more about B2BE’s range of Procure to Pay solutions.
About B2BE
B2BE delivers electronic supply chain solutions globally, helping organisations to better manage their supply chain processes, providing greater levels of visibility, auditability and control. We’re driven by a passion for what we do, inspired by innovation, and underpinned by a wealth of knowledge. With over 20+ years of experience, the B2BE teams operate worldwide.
For more information, visit www.b2be.com.