You find out that due to panic buying during lockdown, your packs of Maggi noodles are running out of stock. So you place an order for another 100 packets and create a Purchase Order (PO) for the same. However, after a few days, you find out that someone else from your store has ordered it too.
To avoid duplication of orders and manage your POs efficiently in any context, iRetail Point of Sales (POS) software integrates the purchase order into the inventory management system. This feature makes it easier to anticipate future inventory (which is on its way), as well as give automatic replenishment updates.
Using purchase orders to track incoming inventory will also help you in budgeting by apprising you about outgoing payment. With iRetail’s automatic updation feature, you will know how much money you owe to the supplier, and subsequently also know when to spend and when to stop.
Before we go further, let us first discuss what is a purchase order and how an efficient POS can manage purchase orders efficiently :
What is a Purchase Order?
A Purchase Order (PO) is an official document issued by a buyer, promising to pay the seller or supplier for the sale of certain goods or services to be delivered in the future.
It conveys product specifications and clearly sets the expectations of the transaction. For many, it is similar to a “cart” on e-commerce websites that summarises your order just before you make a payment.
POs are legally binding and are used to protect the interests of all parties involved in any context. For the sellers, a PO safeguard that they will be paid after the delivery of the products. For buyers, a PO is a guarantee that the supplier will deliver the goods or services on time.
This one small document can go a long way in solving logistical confusions of any growing business.
What is on a purchase Order?
If you see any example of a purchase order, you might confuse it with an invoice as both the documents have a PO number, date and the details of the company. Also, both the documents usually enlist the products ordered in a tabular format with quantity and price in columns. And both the documents end with total amount and an authorised signature.
However, there is a huge difference between the both!
What is the different between purchase order and an invoice?
As both are legally binding financial documents, it is very common to mistake one for another. However, the main difference between the two is that they are used by different people at different time of the transaction.
A purchase order is used by a buyer and is issued before the delivery of the order. However, an invoice is issued by a seller or a supplier stating the amount to be paid after the order is delivered.
|Timing||Before the purchase||After the purchase|
|Format||Lays out goods and services||Lays out products delivered|
|Payment details||Proposed payment details||Actual payment details|
Now, that we have understood the importance of each document, let us also explore ways to understand how does a purchase order work and how to manage it efficiently :
How does a purchase order work?
Imagine yourself as a small retail outlet that is in need of stocking up your bakery inventory. You will prepare a purchase order with a PO number, product request (loafs of breads), quantity, price, shipping address, date of delivery, as well as your contact details. Once the PO is drafted, you send it to the supplier who will deliver freshly-baked bread, croissants and cakes to your outlet. Once you receive the products and it meets your expectations, you log into your system and mark the order as processed and make the payment.
Types of purchase orders :
There are 4 types of purchase orders that any and every business must know :
1. Standard purchase orders : When an ice cream parlour sends a purchase order for a couple of chairs and tables, it becomes a perfect example of standard purchase orders. These POs are typically used for one-off procurement.
2. Planned purchase orders : When an ice cream parlour orders for disposable table mats from a vendor with comprehensive details of the products, it is a planned purchase order. Such a PO requires detailed description of products, price, date of payment and mode of delivery.
3. Blanket purchase orders : When a buyer agrees to buy particular goods or services from a vendor, but does not give any specific amount. It is used for repetitive procurement of basic supplies like paper glasses or plastic spoons for an ice cream parlour.
4. Contract purchase orders : This is like an agreement between a purchaser and a supplier to set the terms of supply for ongoing business relationship. Such a PO might not even enlist the products that will be bought.
How to manage purchase order like a pro :
As a business, it is very important for you to get your purchase orders right in any context :
1. Embrace technology : Like all businesses, it is important to embrace the latest technology to stay on the top of your game. Hence, you should invest in an efficient retail-specific point-of-sale with effective purchase order management. This will make the whole process of creating POs easy and seamless. It is preferable to go for a centralised and automated system, where all information on POs is stored and managed from one place.
2. Proactively prompt : Timing plays a very important role in the whole procurement process or you might lose money. It also shows a degree of professionalism if you master the art of sending purchase orders, vendor service contracts and invoices on time.
3. Bulk ordering : You can reduce the price per unit of goods and avail most of the discounts if you order in bulk. However, make sure that your business is stable and you have a steady inflow of money as bulk ordering also means spending more up front.
4. Empower employees : As employees are the backbone of any company, it is advisable to incorporate a purchase requisition system and train employees to use it. This will empower them to request for materials they need for their work, and will help them to understand how your business works.
Let’s make our business better :
Any B2B transaction requires a lot of paperwork like requisitions, purchase orders, quotes, invoice, receipts, etc. If all this paperwork is generated, recorded and distributed manually, then there are bound to be mistakes. Or worse it can get misplaced and bring losses to your company.
Hence, going in for iRetail’s comprehensive software solutions makes the whole process of generating, tracking and managing POs quicker, easier and more accountable.
So, are you ready to safeguard your business? If yes, then ask for a free demo for iRetail POS that allows you to manage and streamline purchase orders efficiently.
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