Work orders, asset management, parts inventory and purchase orders
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Answered September 24 2019
Purchase orders (PO) are created to start a purchasing relationship with an outside vendor or contractor. Any business that uses raw materials or hires outside services needs to issue purchase orders, possibly to multiple vendors. Purchase orders include quantity, delivery schedule, payment terms, and other key information.
A purchase order is a document used in commercial transactions that identifies the quantity, type, and price for a product or service. Purchase orders are not invoices, but they are legally binding.
It’s important for purchase orders to contain detailed information about both the company and the vendor. Fields such as quantity, price, description, taxes, and payment terms must be completed so that both parties are in agreement. If discrepancies arise, the purchase order can be consulted for verification.
The name, address, email, phone number and other contact information for both companies should be completed. Since the purchase order will be used by both the ordering business and the contractor, contact information is critical for future communication.
Both the ordering company and the outside vendor will need to track purchase orders, probably within a centralized computer system. Assigning a clear PO number will help both parties access the information quickly and efficiently.
If an order involves raw materials, one should include individual SKU numbers on the purchase order. This ensures the correct items are being selected, packed, and invoiced. The purchase order can also be used to cross-check received items.
The name of the items, as well as identifying information such as size, color, or model number should be listed in further detail. This is often easier to identify than an alphanumeric number or barcode.
The number of each item ordered should be listed. Quantities should correspond clearly to the item number and description. This is particularly important if a given quantity is back ordered or is not currently available.
Prices for each item should be listed with the quantities so that both parties can clearly see the original amounts being charged. Typically, discounts or sale amounts are listed elsewhere on the purchase order.
These totals are usually found on the bottom right side of the purchase order. These amounts allow both parties to see the taxes being charged as well as at the grand total of the order. If discounts are applied, they can be calculated in this area as well.
Both the ordering company and the vendor should have determined payment terms during the contract negotiations. Listing the payment due date on the purchase order allows everyone to be on the same page. Both parties know when the invoice will be billed and when it should be paid.
Purchase orders provide a legally binding way to help both the ordering business and vendor keep track of orders. They are paper or electronic documents that can be created, filed, and accessed if disputes arise. They also provide a summary of payment and delivery agreements.
Purchase orders are legally binding documents and should be kept either in paper or electronic form. You may need them to prove that an order was delivered or received if disputes come up.
Both the purchasing company and the vendor use purchase orders to keep track of transactions over time. Both businesses may want to look at their purchase orders as a whole to save money or increase efficiency.
Although agreements and contracts are typically drawn up before a purchase order is issued, the PO provides documentation. If either party cannot recall the terms, they are clearly laid out in the purchase order.
Invoices usually follow purchase orders. While POs are initiated to order goods, work order invoices are sent to request payments once goods are received. Buyers send POs while sellers send invoices.
Purchase orders and invoices are sent by different companies. The business ordering goods or services initiate a purchase order. The vendor or third-party organization sends the invoice once goods have been shipped.
Just like the company issuing the purchase order and invoice are different, so are the requests themselves. Purchase orders ask for items or services to be shipped or performed. Invoices request payment to be sent.
Typically, purchase orders are sent at the beginning of a transaction, requesting that goods are sent. Invoices usually follow at a later time once the goods have been received and accepted.
Although you can do it with a variety of systems, generating purchase orders using a CMMS can streamline the process. For example, in UpKeep, you can automatically create a purchase order when your inventory is running low. When a work order uses enough parts to trigger a low inventory warning, UpKeep can initiate a purchase order. Here is an example:
Purchase orders are critical to the operation of any business or organization that orders supplies, raw materials or services. They contain important information for both the purchasing company and the vendor to understand, track, and fulfill the order. They are different from invoices in that they are initiated by the company wishing to purchase items. Invoices, on the other hand, are sent by vendors selling items and sent after the PO and items are received.