MAKING A PURCHASE ORDER FORM

FOR SUPPLY OF MATERIALS

Submitted by
Nandini Nandakumar P
S2MBA
ROLL NO:17
Purchase Order Form:
A purchase order (PO) is a commercial document issued by a buyer to a seller,
indicating types, quantities, and agreed prices for products or services the seller will
provide to the buyer. It is a written sales contract between buyer and seller detailing the
exact merchandise or services to be rendered from a single vendor. It will specify
payment terms, delivery dates, item identification, quantities, shipping terms and all other
obligations and conditions.

Sending a PO to a supplier constitutes a legal offer to buy products or services.

Purchase order usually contains: PO number, shipping date, billing address, shipping
address, terms of payment (usually in the form of NET 30, NET 45 and NET 60
depending on requirements set by the seller), and a list of services/products, often
including specifications and reference or part numbers of the items to be purchased, with
quantities and prices. When accepted by the seller, it forms an agreement between buyer
and seller . The terms and conditions should be stated.

Purchase Order Forms help you to tell a supplier exactly what it is that you wish to
purchase from them.Using this Purchase Order Form, you can clearly specify the
delivery details, billing information and order details for your supplier. Rather than
calling them to request your purchase, send them a Purchase Order Form. On the
Purchase Order you describe what it is that you require, when you want it and how much
you expect to pay for it. By using this Purchase Order Template, you can ensure you
receive exactly what you have ordered, at the right time and the right price.Once
completed, this form is issued to monitor the suppliers fulfilment of the order.By
specifying the items you want to procure, on a Purchase Order Form, you can ensure you
have clearly communicated your request to the supplier.

A purchase order form is a request from one company to another to send supplies,
equipment or materials. A purchase order form is a legal document that protects both
buyer and seller. A purchase order form indicates the terms and conditions under which a
product will be delivered to a buying company. Purchase order forms can be created
manually or with computer software. There isn't a set template or standardized way to
create a purchase order form, but there are specific elements that should be included.
Standard purchase order usually contains

1. PO number -- It is an auto running number to keep track with your order and for
your own record.

2. Shipping date -- The date that you agree with your customers that you will ship or
delivery the products.

3. Billing address -- Where you are going to send invoices to charge your customers

4. Shipping address -- Where you want to deliver your products.

5. Terms of payment -- How customers will pay you. For example, 45/60 days
credit terms etc.

List of services/products -- Include quantity (unit) price per unit and total price

Why firms use purchase order?

There are several reasons why companies use purchase orders. They allow buyers to
clearly communicate their intentions to sellers, and in the event a buyer refuses to pay for
something which was sent, protects the seller. For example, say Person A works for
Company A and orders some parts from Person B at Company B. There could be a
problem if Person A didn’t actually have authority to authorize this order - maybe they
thought they had the boss's permission but there was a miscommunication. So, the order
gets returned and Company B loses money. Depending on the situation, Company B
might only lose shipping and packing costs, but they might lose significant
manufacturing labor and materials costs and other expenses. They might lose the product
entirely (for example, if it is perishable).

In order to prevent such problems, sellers often request purchase orders from buyers. POs
also help a purchasing agent manage incoming orders and pending orders. Purchase
orders also are an economical choice for a business because they streamline the
purchasing process to a standard procedure.This document represents the buyer’s intent
to purchase specific quantities of product at specified prices. In the event of non-
payment, the seller can use the PO as a legal document in a court of law to demonstrate
the buyer’s intent and to facilitate collection efforts. Companies usually request purchase
orders when doing business with other companies for orders of significant size, as the PO
reduces the risks involved.In the course of the accounts payable process, purchase orders
are matched with invoices and packing slips before the invoices are paid.
This Purchase Order Form helps you identify the:

 Purchase details and requested delivery date

 Delivery details for the items purchased

 Billing and supplier information

 Quantity and unit price of each item

 Total price of the purchase

By using this Purchase Order Form, you can:

 Monitor the delivery of goods and services from suppliers

 Put in place an approval process to control project expenditure

 Ensure that suppliers deliver exactly what was requested

 Report the status of your procurement to management

If you want to monitor and control the delivery of goods and services to your
organization from external suppliers, then this Purchase Order Form will help you do it.
Creating a Purchase Order Form
Step 1

Create a title for your purchase order form. List the name of the vendor you're purchasing
goods from at the top of the purchase order form. Include all of a vendor's contact
information, such as phone numbers, email addresses, and the physical address of the
vendor.

Step 2

List the items your company wants to buy from the vendor. Quantities should be entered
in the left margin, followed by the name or description of the product. This protects you
and your vendor from having to deal with issues like partial shipments.

Step3

Write the payment terms clearly on the purchase order form. Most vendors expect
payment in 30 days or less from the time you receive your supplies. If the vendor offers
discounts to you for paying early, place the time frame you have to take advantage of the
discount on the purchase order form. This prevents confusion in regard to payment
issues.

Step 4

List the price of each item you're requesting to the right of the item description. Price
should be listed on a per unit basis, and multiplied by the quantity ordered. If you order 4
widgets at $1.00 each, your total cost of widgets equals $4. Add the total of each line
item to calculate the sub-total of your purchase order.

Step 5

Indicate the method of delivery on the purchase order form. In some cases, you'll pick up
your order in person, or it may be shipped to your place of business. If your order is
shipped, the carrier being used to ship your goods should be indicated.