What is Purchase Order and its benefits?

What is Purchase Order and its benefits?

A purchase order is a legally binding document issued by a buyer to a supplier, indicating the type, quantity, price, and delivery date of the goods the buyer intends to purchase.

The purchase order formally confirms the buyer's intent to purchase the goods and provides a basis for invoicing and payment.

The benefits of using purchase orders include the following:

1. Improved accountability: Purchase orders help track the status of orders, delivery dates, and payments – thus improving accountability.

2. Better financial control: Purchase orders enable companies to better manage their cash flow by ensuring that funds are available to cover purchases before they are made.

3. Streamlined communication: Purchase orders provide a clear and concise communication method between the buyer and the supplier, reducing the risk of misunderstandings.

4. Enhanced relationships: Using purchase orders builds stronger supplier relationships by providing clear expectations and a more efficient ordering process.

Overall, using purchase orders can help companies improve their procurement processes, reduce costs, and build better relationships with suppliers.