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The Importance of a PO Form PDF Print E-mail
Written by Cecilia Chee, Singapore   
Monday, 03 October 2011 17:26



The Importance of a Purchase Order Form


Even though computers have changed a lot in the way of automating purchase orders the old procurement system is still a great standby mechanism. The purchase order also called a PO is a contract which binds both parties i.e. buyer and the seller to do business. A purchase order form is a form which enables either the buyer or the seller to fill it out with relevant information and use it as a purchase order. In the majority of cases it’s the buyer who is responsible for making a purchase order by filling out the form. There are however various types of forms and despite the fact that each form may appear different their underlying purpose is essentially the same.

A purchases order is a very important document especially where B2B transactions or business to business transactions are concerned. A purchase order essentially allows the supplier to have the funds and approval of the purchase in hand. For a vendor a valid PO means that regardless of what happens as soon as they delivery of the goods is made they will get paid. The PO for a vender can be considered as good as getting paid. This is why many vendors insist that companies furnish them with a PO prior to them giving the company the goods or start work on a project. A purchase order form is usually filled with the name of the vendor, list of items and the issue date of the order etc. There will also be a section where the form will be stamped and signed by the company’s head of department which signals financial approval.

From a vendor’s perspective there are 5 elements of a purchase order that need to be present prior to signaling fulfillment to commence:

1. The most important thing of a PO is the PO number. This PO number is usually printed on the purchase order form and it’s the number that the accounts payable executive will use to pay what has been invoice once he receives it. The PO number can be thought of as a link between the company and the vendor getting paid.

2. The second most important thing is the shipping address. This is the address where the items need to be shipped or delivered to.

3. The bill to address is where the invoice needs to be sent to by the vendor.

4. The item detail section will contain exact details of the items that a customer needs or wants.

5. The price is another important aspect and this section will contain the overall amount of what the PO amounts to.

A purchase order is a binding contract between a supplier and the company. Without a purchase order it will be hard for a company to purchase anything from another company without having to first put down a cash payment. While in some companies a cash down may be included in the policy in most companies a PO is what really holds both the vendor and the company together until the invoice is paid.


Last Updated on Monday, 03 October 2011 19:36
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