The Purchase Order Process Explained: A Comprehensive Guide
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Purchase orders are among those parts of the business that can sometimes get buried under other tasks. Perfecting the purchase order process can take time and thus is often not prioritized. However, having an efficient purchase order process goes a long way in maintaining AP efficiency. The time taken to rework a purchase order can significantly slow down other production activities, leading to delays.
In this article, we cover what a purchase order process is and the various steps involved in executing a purchase order.
Table of Contents
- What is a Purchase Order Process
- What Information Needs to be Included in a Purchase Order
- Why Do Companies Use Purchase Orders
- The 6 Steps for Creating a Purchase Order
- Manual vs Automated Solutions in the Purchase Orders Process
- Purchase Order Process Flow
- Conclusion
What is a Purchase Order Process?
Before looking at the purchase orders process let us understand what exactly a purchase order is. A purchase order is a document that officially confirms the purchase of goods and services between a buyer and seller. It is created by the buyer to authorize a transaction that may not have been confirmed in writing before. As it is an official document, it is legally binding on both parties.
A purchase goes through several stages between when it is created and it is accepted by the vendor. These stages form a purchase order process.
What Information Needs to be Included in a Purchase Order?
A purchase order is important since it gives a clear set of guidelines and instructions to the vendor. It also provides the buyer with legal proof of the exact details that have been agreed upon. This helps avoid miscommunication.
A purchase order includes every bit of information about the transaction such as:
- Specifications and quantity of the items required
- Contact information
- The price at which goods or services are to be purchased
- Order date
- Delivery timelines and details
- Payment terms and conditions
- A purchase order number for tracking
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