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Purchase Order – What is it? Formats, Benefits and How to Create & Share?

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Issuance of Purchase order is a way of doing business in process. It builds clarity between customers and buyers. If you are doing business in goods & services, Here you will get to know all about the Purchase order. Keep reading to know what is a purchase order, Purpose, use, Format & how to create & Share a purchase order from vyapar?

# What is the Purchase Order? 

A purchase order is a formal contract between the buyer and the seller that provides a list of specific goods/services that the buyer wants to buy, along with their agreed prices. This formal document includes important information, such as unique numbers for tracking the purchase order, delivery date, type of item, quantity, etc. The purchase order is also known as ‘PO’. More specific orders will include more details, the more information you include, the more effective your PO is.

PO needs to be issued by the buyer to the seller for the purpose of procurement of goods and services. It is not a part of books of accounts for the financial transactions. It is also not a legal contract but works as a commercially binding document between the two parties. Few Billing software allows you to convert the PO into a final purchase invoice in just a click and helps to save your time and energy. Vyapar App is one of them.

# Why is the Purchase Order (PO) Required?

Instead of a straight contract or in the case of smaller purchases there’s another option to consider – a Purchase Order. Purchase orders are a great option when you don’t need a lengthy and multi-page contract. A PO is a formal intent that buyers send to sellers to document the sale of goods/services to be delivered at a delivery date. 

For example, if you order 10 Chairs but you received only 9, your PO is a proof that you were supposed to receive 10. purchase order(PO’s) are important for Sellers too because they can use that as evidence that the order was formally placed by the Buyer and buyer is supposed to make payment after the goods/services have been delivered.

# What is a procedure of PO? How does it work?

The purchase order process flow differs from business to business. As there are no guidelines dictating the exact procedure of a PO, businesses are free to choose a process that suits their business needs. Here’s the purchase order process:

  1. The process begins with noticing the low inventory or any service is required.
  2. The concerned person creating the PO laying out exactly what they want from the supplier with basic details and sending for internal approval.
  3. Once it is approved, it is sent to the supplier.
  4. The supplier can either accept the order or decline it with a reason.
  5. In case the supplier responds “yes,” and the delivery date is confirmed, the final details need to be sent to the receiving department.
  6. Now the buyer will receive the goods on the agreed due date along with the final invoice and the buyer has to make payment to the vendor within agreed terms after physical verification of goods/services delivered.

# Format of Purchase Order 

There is no exact presentation or format of a purchase order. It should be clearly mentioned in the header as “Purchase order(PO)” which indicates that it is a document of final & actual purchase from buyers end. The Purchase order Format generally include:

  1. Buyer’s name and address (Company details)
  2. Vendor/ Seller’s name and address
  3. Delivery/Shipping information (Where good/service being delivered to)
  4. A detailed description, quantity, price for each product/service, Tax etc.
  5. Unique Purchase Order number
  6. Terms and conditions, like: – Payment terms, Shipping and delivery Date & terms, Acceptance terms
  7. Approval/authorization by the Buyer and Seller

# What is the Difference Between an Invoice and a PO? 

Each document is used at a different point in the buying process, and used by different people as well. Here’s a list of differences between PO and invoice:

#Purchase Order (PO)Invoice
DescriptionCreated by the buyer, PO is an official order form to communicate the specific products/services, the buyer agrees to buy from the seller. Invoice refers to a final bill issued by the supplier containing the details of goods or services delivered to the customer and the buyer is liable to pay the amount.
Objective Issued to seller to document the goods/services buyer wants to purchase Notify the buyer that he is liable to pay the amount against goods or services he purchased.
Time of issue Created before purchase Created after goods/services delivered to the buyer.
Conclusion Lays out goods/services required It confirms that goods/services delivered

# Benefits of Using Purchase Order

  1. Helps to track your purchase history
  2. Gives option to order goods/services in advance in specific amounts
  3. Helps to gain better control on inventory
  4. Simplifies the purchase process
  5. Helps to save your time by easy conversion of PO into Invoice
  6. Helps to avoid any future disputes regarding the purchase
  7. Gives a quick check for open and closed orders
  8. Digital way of generating Purchase orders is a better way to make business less dependent on manual processes. (Try Vyapar Now)

# How to Create a Purchase Order in Vyapar?

To issue a PO in Vyapar, you’ll need to include certain fields and information along with the header “Purchase order”, so your customer can quickly understand the nature of the document. 

A PO will generally include: Your company name, logo and address, A list of the products/services what you want to buy, Quantities and Prices for each item/product on the list, Applicable tax rates and the tax amount, The total amount that should be paid to the seller, Your payment details and terms. Importantly, a Purchase order must have a unique reference number/ PO number.

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1.) Click on the “Settings” in left menu > Click on “General” > Enable the option “Sale/purchase order” (allows you to make sale/PO and convert them into final invoice)

2.) Go back to home screen > Open the transactions menu by clicking on “+” button > Click on “Purchase order”

3.) You can enter the unique PO number here > Enter the seller’s name 

4.) Click on “Add Items” button > Enter the items/products with all the details > Click on “Save” button

5.) Enter remaining details such as place of supply/ description > Click on “Save” button

(Take a print out or Share the PO on email WhatsApp etc by using a sharing icon) 

6.) You can also track the pending Purchase order and convert them into actual invoices by following this-

Left menu > “Purchase” > “Purchase orders” > “Convert to purchase”

You can add or alter multiple settings as per your requirements from settings option.

# How to Send a Purchase Order to a Supplier?

PO is a document to address your requirements to the seller. From the vyapar application you can directly share your PO with your seller’s on message, email, whatsapp etc. by following these steps

Left menu > “Purchase” > “Purchase orders” > Click on particular order > Click on Share icon > Select the preferred option > Select the channel you want to share/send the Purchase order by

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