Buying without purchase orders works while one person does all the buying and remembers everything. Once several people order, or suppliers deliver in parts, a written order is the only way to know what is still to arrive and whether the bill is right.
Why use purchase orders
- Everyone can see what has been ordered, from whom and at what price.
- Goods received can be checked against what was ordered.
- Supplier bills can be checked against what was ordered and received.
- Spending can be approved before it is committed, not after.
The process, step by step
- A requirement is raised: low stock, a customer order, or a planned need.
- A purchase order is prepared with items, quantities, agreed prices, tax and delivery terms.
- The order is approved, where your business requires approval, and sent to the supplier.
- Goods arrive and are counted and checked; the quantity received is recorded against the order.
- The supplier bill is matched against the order and the receipt before it is accepted.
- The bill is paid on its due date and the payment is allocated to it.
Three-way matching
Matching the purchase order, the goods receipt and the supplier bill line by line catches the most common purchasing errors: being billed for goods that never arrived, for more than was ordered, or at a higher price than agreed.
Partial receipts
Suppliers often deliver in parts. Keep three quantities on each order line, ordered, received and billed, so you always know what is still to arrive and what is still to be billed.
Common questions
Can an ERP manage purchase orders and invoices?
Yes. In an ERP, the purchase order, the goods receipt and the supplier invoice are linked, so you can see what was ordered, received and billed on each line. In AYBN ERP, purchase orders, goods receipts and purchase invoices are linked in this way.