A purchase order is a commercial source document used by a company to place an order with one of its vendors or suppliers. The document contains information about the items to be purchased, including the types of commodities, quantity, and price. It is, in simple terms, the contract that the buyer drafts when purchasing items from the seller.
Benefits of Using Purchase Orders
Purchase orders are useful for keeping track of inventory and purchase history. Moreover, the buyer can order goods in advance and avoid supply shortages. Purchase orders help sellers keep track of inventory, regular orders, and more. Most importantly, this documentation ensures that the buyer will pay once the purchase has been fulfilled, giving the seller peace of mind and legal protection.
How Does a Purchase Order Work?
Purchase orders are routinely used by businesses that require large quantities of goods. A pharmacy, for example, may need to order numerous types of pharmaceuticals from suppliers, each with multiple packs, and a purchase order will be raised detailing the items.
In an organization, a purchase order goes through the following steps.
1. The business owner prepares a purchase order that specifies exactly what they require from the supplier.
If the supplier has the inventory to fill the order, they will accept it, fulfill it, and deliver the items on the agreed-upon deadline.
The supplier will also deliver a bill or sales invoice for the goods that have been purchased.
The buyer will accept the items and pay the supplier subsequently.
How to Create a Purchase Order
In this video, we will cover on how to create purchase order.
First, let’s start with a brief overview of a purchase order.
A purchase order is a commercial source document used by a company to place an order with one of its vendors or suppliers. The document contains information about the items to be purchased.
In mySky, you can find the purchase order template under the category of Orders and receiving in the menu bar.
The purchase order screen contains multiple tabs to make the ordering procedure easier for you.
The first tab is the transaction. This section allows you to enter the purchase order's general information, such as the document number, supplier name, attention, remarks, date, valid till, and from location.
You can fill up the necessary fields by entering the values or searching by the default menu.
The next section of the purchase order is the Details tab. This is where you enter the product details you wish to order. This tab contains mandatory fields such as Item Code, Order Quantity, and Discounts, if any. Once all the required items listed with relevant information such as quantity and discount, we can move on to the next tab. In this remarks tab, you can add additional remarks for your purchase order, and through the attachment tab, you can upload an attachment which is related to this purchase order.
Let's look at how to create a purchase order in mySky back office.