Purchase orders can authorize a single purchase or a series of purchases.
Purchase orders (POs) are authorization documents issued by a buyer and extended to a seller. Its main function is to specify the purchase conditions that will exist between the two entities, at least with respect to all purchasing activities specified in the document. This sales order form can be used to authorize a one-time purchase or provide the means to establish and control a series of purchases over an extended period of time, usually a calendar year.
A purchase order is issued to determine the terms and conditions under which a purchase is made.
Before a purchase order is produced, many companies use an internal document known as a purchase requisition or simply requisition. A department or other entity within the company structure submits a request to purchase specified goods or services using this document. The requisition usually carries a specific identification number, making it relatively easy for the purchasing department to keep track of whether or not the request has been approved, denied, or is still under consideration.
When a purchase requisition order arrives at a purchasing department, it is usually evaluated to see if the item is really needed.
In the event that the appropriate purchasing agent approves the requisition, a purchase order is issued to determine the terms and conditions under which the purchase is made. This usually involves identifying the supplier who will fulfill the order, the unit price of the goods or services supplied, and the total purchase price. Often, suppliers include the order number on the invoice for the filled order, making it easier for accounts payable to process the invoice and apply fees to the department that originally ordered the order.
Along with its use in evaluating and approving requested purchases on a one-time basis, this document can also be used to authorize multiple purchases within a specified time period. This is often called a PO or scheduled order. For example, if a department at a particular company wanted to use audio conferencing throughout the business year, it would submit a requisition to purchasing that covered the number of call minutes needed to successfully hold these conferences throughout that year. The purchasing department then looks for a supplier who will provide the service at a reasonable rate per minute/line. Once the supplier is identified and approved, the purchasing agent places an order for that supplier,
While larger companies more often use a requisition form and a purchase order to track their order activity, smaller companies sometimes combine the two documents, effectively using the same identification number to request the purchase of items and approve that purchase. solicitation. Sometimes the decision to use a single document or both documents has to do with complying with government regulations as well as maintaining a comprehensive internal history. As long as the documentation used creates a consistent and accurate record of transactions and provides the company with the details it needs, either approach will work.