Purchase Orders and Accounts

Purchases do not need to be made using the e-commerce store and can be made directly with EconoMed itself. To do this a Purchase Order would be required. Using a Purchase Order equates to 'Account' as each order will have the essential information necessary to make a purchase.

A purchase order (PO) is a legally binding document issued by a buyer to a seller, authorising a purchase. Think of it as a formal instruction from a customer to a supplier to deliver specific goods or services at a predetermined price and within a set timeframe.

Key Components of a Purchase Order

While the exact layout can vary, a typical purchase order includes essential information to ensure clarity and avoid disputes:

  • PO Number: A unique identification number for tracking purposes.
  • Buyer Information: The name, address, and contact details of the company placing the order.
  • Vendor Information: The name, address, and contact details of the supplier.
  • Date of Issue: When the PO was created.
  • Delivery Date: The requested date by which the goods or services should be delivered.
  • Shipping Address: Where the goods should be sent.
  • Payment Terms: Details on how and when the buyer will pay (e.g., "Net 30" meaning payment due 30 days after the invoice date, "Due on receipt," etc.).
  • Itemised List of Goods/Services:
    • Description: A clear and detailed description of each item or service.
    • Quantity: How many units of each item are being ordered.
    • Unit Price: The agreed-upon price per unit.
    • Total Price: The calculated cost for each line item (quantity x unit price).
  • Subtotal: The sum of all itemised costs.
  • Taxes: Any applicable sales tax or VAT.
  • Shipping Costs: If applicable, the cost of delivery.
  • Grand Total: The final amount due.
  • Terms and Conditions: Any specific clauses related to the purchase, such as warranty information, return policies, or quality standards.
  • Authorisation Signature: Often, a signature or electronic approval from an authorised person within the buying company.

How Purchase Orders Work

The PO process generally follows these steps:

  1. Creation: The buyer identifies a need for goods or services and creates a purchase order based on a quotation or agreed-upon terms with a supplier.
  2. Submission: The buyer sends the PO to the seller.
  3. Acceptance: The seller reviews the PO. If they agree to fulfil the order under the specified terms, they accept it. At this point, the PO becomes a legally binding contract.
  4. Fulfillment: The seller delivers the goods or performs the services as outlined in the PO.
  5. Invoicing: The seller issues an invoice, which should reference the PO number and match the details of the accepted purchase order.
  6. Payment: The buyer pays the invoice, cross-referencing it with the original PO to ensure accuracy.

Why Are Purchase Orders Important?

Purchase orders are crucial for several reasons:

  • Clarity and Accuracy: They eliminate ambiguity by clearly stating what's being bought, at what price, and when it's expected. This reduces errors and misunderstandings.
  • Legal Protection: Once accepted by the seller, a PO serves as a legal document protecting both parties. It provides proof of the agreed-upon terms.
  • Budget Control: They help buyers track and control spending by ensuring purchases align with approved budgets.
  • Fraud Prevention: POs create an audit trail, making it harder for unauthorised purchases to occur.
  • Streamlined Operations: They standardise the procurement process, making it more efficient for both buyers and sellers.
  • Inventory Management: For businesses that manage inventory, POs are essential for tracking incoming stock and forecasting needs.

In essence, a purchase order is more than just an order; it's a foundational document for effective and organised business transactions.