A Purchase Order number (P.O) is a specific number appointed to a purchase order form. In a purchasing process, the purchase order details the goods or services a business wants to get from a particular supplier.
The purchase order number on an invoice refers to the transaction process by both purchaser and the dealer.
This article covers:
- How Do Purchase Orders and Invoices Work?
- What Is P.O. Invoice and Non-P.O. Invoice?
- How Do You Create a P.O. Number?
- What Information should Be on a Purchase Order?
How Do Purchase Orders and Invoices Work?
A Purchase Order is made and given by the purchaser (or customer) of a product or service toward the transaction’s beginning.
It gives the details of a deal, for example:
- the goods or services required
- the amounts
- the agreed-upon pricing
A properly dispatched out purchase order should be definite enough that the seller will comprehend it effectively, without the need to inquire. Since both parties approve the purchase order, it is considered lawfully authoritative.
The purchase order number, typically found at the top of the form referencing continuously throughout the transaction in:
- customer phone calls
- shipping forms
- the invoice
An invoice is a bill given by the seller by the end of the transaction upon completing the terms outlined in the purchase order. Likewise, it will list the details of the goods or services that the seller provides, including amounts and price with the purchase order.
It also references the P.O. number to show the confirmed transaction. The purchaser must have to pay it under the terms previously agreed upon (for example, the dealer may require payments from every one of its suppliers within a month).
What Is P.O. Invoice and Non-P.O. Invoice?
A P.O. invoice is an invoice that references the purchase order number in the open invoice. Whereas a non-P.O. invoice does not. A non-P.O. invoice implies that the purchase order is not necessary for the billing transaction.
The reasons for not producing a purchase order could include:
- The order is urgent and processes rapidly (customers do not have enough time to issue).
- The transaction is under a specific dollar figure. The policy of numerous companies is to not provide P.O.s for each transaction, only for ones that exceed a particular dollar amount.
For example, a company may not need purchase orders on all transactions under $20,000. If it does, at that point, a purchase order requires the approval of the management board.
- A small business requires a service or product, but it does not have enough resources for a proper accounting or purchase order system.
How Do You Create a P.O. Number?
A small business can simply make its purchase order template and allocate numbers to each new order, permitting a professional purchase order system as part of an effective accounting software solution to save a lot of time and effort.
Accounting software automatically produces fields for the purchase order entry and allocates a new number to everyone. A proper software accounting system also routes purchase orders for signing off.
What Information Should Be on a Purchase Order?
It requires all the details regarding the purchase process to avoid any misconception.
The information must include:
- Contact Information
- PO Number
- Item SKU
- Item Description
- Subtotals, Taxes, and Totals
- Payment Due Date