What is a Purchase Order (PO) in Retail

Likelihood is that when you’re studying this, you’re interested by procuring items for what you are promoting. 

If you wish to receive items from suppliers in a easy, predictable and arranged style, utilizing buy orders can definitely assist. 

On this article, you’ll be taught:

1. What is a purchase order?
2. What a purchase order is used for
3. How purchase orders work
4. How to create a purchase order
5. What a purchase order number is
6. The difference between a purchase order and an invoice
7. The 4 different types of purchase orders
8. How to manage purchase orders
9. How to create a purchase order in Lightspeed

Let’s dive in!

 

What’s a purchase order order?

A purchase order order (PO) is an official doc that’s issued by a vendor to pay a provider for the sale of a listing of particular services or products that can be delivered sooner or later.

Sometimes, a PO consists of the categories, portions and costs of the services or products being bought by the seller. The extra particular an order is and the extra particulars a vendor consists of, the simpler the PO can be. 

As soon as a provider accepts a vendor PO, it kinds a legally binding contract between the seller and the provider. That’s why it’s essential for distributors to incorporate as a lot pertinent info as attainable of their POs.

Purchase orders are extremely helpful for controlling and documenting the acquisition of services and products from exterior suppliers.

What’s a purchase order order quantity?

Every PO has a singular buy order quantity related to it that helps each distributors and suppliers observe supply and cost.

 

What’s a purchase order order used for?

One of many key advantages of buy orders for distributors is that they’ll place an order with no need to instantly pay for the order. For suppliers, a PO is a solution to give distributors credit score with none threat, for the reason that vendor must pay as soon as the services or products are delivered. 

What are the advantages of buy orders?

Together with the money stream advantages, there are a couple of different explanation why POs are so helpful for distributors and suppliers alike: 

• Higher accuracy for stock and monetary administration. 
• Improved budgeting as a result of funds should be out there previous to a PO being issued. 
• Faster supply, since POs assist a vendor schedule deliveries for after they want it. 

What are the cons to buy orders? 

We are able to go on file and say that POs have much more execs than cons. So far as cons go, there are a pair:

• Extra paperwork for smaller purchases.
• From a strictly monetary perspective, utilizing a bank card can serve the identical function.

However if you wish to hold your financials and stock administration organized and correct, buy orders are the best way to go. 

 

How does a purchase order order work?

A PO is supposed to simplify the buying course of between distributors and suppliers. Whereas every retailer’s course of can differ, right here’s an instance of how a typical buy order course of appears to be like: 

1. The seller decides to buy a product for his or her enterprise.
2. The seller points a PO to the provider, oftentimes electronically utilizing a purchase order template.
3. The provider receives the PO and confirms to the seller that they’ll fulfill the order. If not, the provider lets the seller know and the PO is canceled. 
4. If the provider can fill the order, they begin getting ready the order by pulling the requested stock and scheduling personnel to package deal and ship the order. 
5. The order is shipped to the seller’s specified supply location with the PO quantity on the packaging listing.
6. The provider invoices the seller for the order utilizing the PO quantity in order that it may be shortly matched with the cargo’s supply info. 
7. The seller pays the provider in line with the bill phrases specified within the PO. 

 

create a purchase order order

Whereas every enterprise is totally different, most POs will embrace: 

1. Firm and vendor title
2. The amount being bought
3. The services or products being bought
4. Model names, SKUs or mannequin numbers
5. The value per unit
6. Supply date
7. Supply location
8. Billing handle
9. Cost phrases (reminiscent of cost upon supply or inside 30 days after the seller receives the order) 

What does a purchase order order appear like?

Buy orders are sometimes a standardized doc that comprises firm info (title), transport particulars (supply and billing handle), provider info (title and handle) and order info (product, value, amount, supply date and cost phrases).

Many retailers go for standardized buy orders to keep up consistency between them and their suppliers.

 

 

create a purchase order order in Lightspeed’s Retail POS system

Lightspeed Retail POS has strong stock administration capabilities to make retailers’ lives simpler. 

Retailers can create and ship buy orders to distributors in a single place, with no clunky Excel spreadsheets needed. 

In case you’re interested by seeing the best way to batch import gadgets into a purchase order order, set automated reorder factors or construct particular orders, take a look at our Assist Heart article on creating purchase orders for a step-by-step walkthrough. 

 

What’s the distinction between a purchase order order quantity and an bill?

The primary distinction between a PO and an bill is who creates the doc. A vendor creates a PO, which must be fulfilled by the provider. A provider prepares an bill for the order and points it to the seller.

So, in a nutshell, a PO is for a vendor to order merchandise, whereas an bill is for a provider to receives a commission by the seller for supplying the merchandise. 

 

The 4 sorts of buy orders

When you might imagine that each one buy orders are the identical, that’s not the case. There are literally 4 sorts of buy orders {that a} retailer can use, every with their very own use circumstances and advantages. 

1. Standard purchase orders
2. Planned purchase orders
3. Blanket purchase orders
4. Contract purchase orders

1. Commonplace buy orders

Identical to the title suggests, normal POs are probably the most generally used. In an ordinary PO, the seller specifies:

• What gadgets they’re shopping for
• The amount of every merchandise they’re shopping for
• The supply location and date
• Cost phrases

2. Deliberate buy orders

When a vendor locations a deliberate buy order, they anticipating their future wants for an merchandise and submitting a PO prematurely. In a deliberate buy order, the seller specifies:

• What gadgets they’re shopping for
• The price of these gadgets
• The supply location
• Cost phrases

For deliberate buy orders, the amount of things is predicated on an estimation and supply dates are tentative, normally inside a set timeframe (for instance, anytime between November 1 – 15).

3. Blanket buy orders

A blanket PO is a dedication from a vendor to purchase services or products from a provider on an ongoing foundation till a specified order worth is reached. Often, the seller locations a number of orders on the identical time to profit from preferential pricing. 

4. Contract buy orders

With a contract PO, each the seller and provider signal a contract that specifies the phrases of the acquisition earlier than a purchase order order associated to the contract is issued. Whereas the penalties for breaching a contract buy order fluctuate, each the provider and vendor have the power to take authorized motion ought to the opposite social gathering not fulfill their finish of the contract. 

The primary advantage of contract POs is that they provide extra authorized safety for each distributors and suppliers. Sometimes, we see contract buy orders for big orders the place distributors need authorized backing ought to a provider make errors, or suppliers need assurance that the seller can pay them in a well timed style.

 

handle buy orders

Whereas POs might be comparatively easy, they’ll nonetheless add complexity to your provide chain course of when you’re not accustomed to utilizing them. For retailers, it’s essential to put money into stable inventory management software and discover a course of to handle suppliers that works for you. 

Listed below are a couple of ideas for managing buy orders:

1. Use expertise to streamline stock administration

The very best factor you are able to do for managing buy orders is investing in a retail level of sale system with nice stock administration capabilities. Lightspeed Retail POS has built-in vendor catalogs and retailers can create and ship POs inside the system. Better of all? Every part is documented and saved on the cloud, so that you by no means lose essential info. 

2. Order in bulk to decrease prices (when you can)

By ordering gadgets in bulk, distributors can profit from preferential merchandise pricing and a decrease price per unit. After all, by ordering in bulk you’re spending extra upfront, so you must solely discover this selection if what you are promoting is secure and also you’re assured you’ll be able to promote the merchandise. 

3. Be well timed to foster nice relationships with suppliers

At all times ship your buy orders, invoices and contracts in a well timed method. Not solely will that guarantee that you’ve got a predictable, regular stream of the stock you want, however suppliers will respect your professionalism, believe in your capability to pay them and wish to proceed working with you.