What is a Purchase Order?

A purchase order is a document generated by a buyer of a company that authorizes a purchase transaction. This document contains certain terms and conditions that, when accepted by the seller (supplier), become a contract accepted by both parties.

The order of buy establishes the descriptions of the products to be purchased, the quantities, prices, discounts, payment conditions, delivery date, and other terms and conditions that either party specify. It also identifies the selling company and the buying company.

These documents are generally signed by buyer and seller and the prices are supported by the quotation that the supplier has previously made. Furthermore, in the event that the buyer refuses to pay, the seller is protected because the purchase order is a binding contract between both parties.

Why is the purchase order important within a company?

Many organizations recklessly do not work with purchase orders because they perceive them as a process and a nuisance that will delay things, or simply because they already have a working relationship with the

vendors. When companies are small they tend to have a simpler purchasing process. Over time, however, the processes become more complex and require a certain order. Once a company grows and the purchase demands are more urgent and / or complex, they can arise communication problems if a purchase order is not used or certain details are not correct in the order.

If a supplier receives a purchase order that does not have the agreed specifications Previously, it can cause problems in the delivery of the products that the buying company really needs. Even more serious, it can happen that the wrongly requested product reaches the buying company and difficulties occur at the time of billing.

A purchase order must be well generated as it provides legal clarity and concrete instructions for the seller, as well as a concrete record that can be used as a point of reference when things are going wrong.