How to Create a Purchase Order

A purchase order is a document the buyer sends to the seller that specifies the details of the goods and services being ordered. If there is not a previously existing contract agreement between the two parties, the document can serve as a legally binding contract once the seller has accepted the order.

A purchase order process is helpful in these situations:

  • Tracking Purchase Orders, issued to vendors.
  • Tracking Deliveries against issued Purchase Orders.
  • Get reports of full received and partially received orders.
  • Analyses of purchasing for your company and projects.

Below are the terms, used to prepare a purchase order:

Vendors

The information of the parties providing goods and services to you. You can maintain contact details and other agreement information belongs to your suppliers.

Buyer

The information of the party buying goods or services by paying to Vendors.

Purchase Order Number

A unique identifier number, used to track the placed order. You can adapt one out of various kinds of LPO numbers like sequence numbers, date format etc.

Description of Goods or Services

The details of the goods and services being ordered, such as item number, item description, quantity, unit price, discount and total cost.

Payment Terms

The terms at which the seller agrees to pay the buyer’s invoice after goods or services have been received. This is usually advance, on delivery, Net 30 or Net 60.

Shipping Address

The address where the supplier should deliver the goods and service, you have ordered.

Expected Delivery Date

The date, goods will be shipped from the seller to the buyer.

Signatures

Both parties must sign the document. The buyer signs it first to indicate the intention of buying goods, and the seller signs when accepting the buyer’s offer.

Note: This article is shared as a general guideline, use or apply with your own understanding and accountability. The smart way to create purchase order is to use any LPO management software.

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