{"id":1149,"date":"2019-11-18T06:08:46","date_gmt":"2019-11-18T06:08:46","guid":{"rendered":"https:\/\/www.certitrek.com\/nlpa\/?p=1149"},"modified":"2021-03-29T02:25:17","modified_gmt":"2021-03-29T06:25:17","slug":"what-is-a-purchase-order","status":"publish","type":"post","link":"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-a-purchase-order\/","title":{"rendered":"What is a Purchase Order and How Does it Work?"},"content":{"rendered":"

A purchase order (PO) is a commercial document and first official offer issued by a buyer to a seller indicating types, quantities, and agreed prices for products or services. It is used to control the purchasing of products and services from external suppliers.<\/p>\n

The purchasing process starts with a need. That need should be verified. The item requirements are checked and noted the PO. The suppliers are checked for availability, price, and delivery time.<\/p>\n

Before issuing a PO, the actual inventory should be checked as well for any backorders for the item. The next step is to get approval in accordance with specific company policies and procedures. (Some companies don\u2019t require approval below a certain price or quantity). Once approved, the PO is entered into the computer system, and the PO issued to the supplier.<\/p>\n

When a seller (aka, supplier, vendor, etc.) accepts a purchase order, a legally binding contract is formed between the two parties. In addition, the buyer should always clearly and explicitly communicate their requests to the seller, so there is no confusion when the purchase order is received.<\/p>\n

Upon receipt, the purchase order is used by the seller to pull purchased inventory for packaging and shipping. Once the inventory is pulled, an invoice is prepared by the seller based on the items and quantities actually provided and prepared for shipment.<\/p>\n

Once the item has been received and signed for, the PO then becomes an account payable if it wasn\u2019t prepaid.<\/p>\n

It is common that the actual shipment may not contain the correct items or quantities. This is when the record of the PO becomes critical. Just receiving an invoice is not good enough. Whoever receives the shipment must check the shipment before signing the receipt to make sure the PO matches the invoice or receipt.<\/p>\n

About 5% of all shipments contain errors and would revert to the PO for rectification, legal action, or reimbursement.<\/p>\n

The basic Purchase Order process steps:<\/strong><\/p>\n

    \n
  1. Create a purchase order.<\/li>\n
  2. Send out multiple requests for quotation (RFQ)<\/li>\n
  3. Analyze and select a vendor.<\/li>\n
  4. Negotiate contract and send PO.<\/li>\n
  5. Receive goods\/services.<\/li>\n
  6. Receive and check invoice (3-Way Matching)<\/li>\n
  7. Authorize invoice and pay the vendor.<\/li>\n<\/ol>\n

    5 Common Purchase Order Mistakes to Avoid in Procurement:<\/strong><\/p>\n

      \n
    1. Ignoring deals from other suppliers. Chances are you use some suppliers more frequently or order greater quantities from them than others.<\/li>\n
    2. Disregarding suppliers\u2019 advice. You\u2019ve heard it before: the customer is always right.<\/li>\n
    3. Accepting prices as is.<\/li>\n
    4. Resisting change.<\/li>\n
    5. Working in isolation.<\/li>\n<\/ol>\n

      Summary:<\/strong><\/p>\n

      One of the few things a company has real control over is how much it pays out for goods and services. While it is easier to take the path of least resistance, purchasing departments and managers should be proactive on how the company spends its cash.<\/p>\n

      NLPA Learning<\/b><\/a><\/span>:<\/b> Looking for authoritative procurement templates, tools, webinars, and more? Stop trying to create resources from scratch and start taking advantage of having exactly what you need right at your fingertips in NLPA Learning<\/span><\/a>.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

      A purchase order (PO) is a commercial document and first […]<\/p>\n","protected":false},"author":12,"featured_media":1154,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1149","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-procurement"],"yoast_head":"\nWhat is a Purchase Order and How Does it Work? - Next Level Purchasing Association (NLPA)<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-a-purchase-order\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What is a Purchase Order and How Does it Work?\" \/>\n<meta property=\"og:description\" content=\"A purchase order (PO) is a commercial document and first […]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-a-purchase-order\/\" \/>\n<meta property=\"og:site_name\" content=\"Next Level Purchasing Association (NLPA)\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/NextLevelPurchasing\/\" \/>\n<meta property=\"article:published_time\" content=\"2019-11-18T06:08:46+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2021-03-29T06:25:17+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2019\/11\/purchase-order.png\" \/>\n\t<meta property=\"og:image:width\" content=\"651\" \/>\n\t<meta property=\"og:image:height\" content=\"725\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"author\" content=\"Galo Matagay\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@nextlevelpurch\" \/>\n<meta name=\"twitter:site\" content=\"@nextlevelpurch\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Galo Matagay\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-a-purchase-order\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-a-purchase-order\/\"},\"author\":{\"name\":\"Galo Matagay\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/person\/72d094fab77892483dfa6e061cb27eaa\"},\"headline\":\"What is a Purchase Order and How Does it Work?\",\"datePublished\":\"2019-11-18T06:08:46+00:00\",\"dateModified\":\"2021-03-29T06:25:17+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-a-purchase-order\/\"},\"wordCount\":504,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#organization\"},\"articleSection\":[\"Procurement\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-a-purchase-order\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-a-purchase-order\/\",\"url\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-a-purchase-order\/\",\"name\":\"What is a Purchase Order and How Does it Work? - Next Level Purchasing Association (NLPA)\",\"isPartOf\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#website\"},\"datePublished\":\"2019-11-18T06:08:46+00:00\",\"dateModified\":\"2021-03-29T06:25:17+00:00\",\"breadcrumb\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-a-purchase-order\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-a-purchase-order\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-a-purchase-order\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.certitrek.com\/nlpa\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"What is a Purchase Order and How Does it Work?\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#website\",\"url\":\"https:\/\/www.certitrek.com\/nlpa\/\",\"name\":\"Next Level Purchasing Association (NLPA)\",\"description\":\"The Next Level Purchasing Association\",\"publisher\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.certitrek.com\/nlpa\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#organization\",\"name\":\"Next Level Purchasing Association (NLPA)\",\"url\":\"https:\/\/www.certitrek.com\/nlpa\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2020\/08\/NLPA-logo-small-1.png\",\"contentUrl\":\"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2020\/08\/NLPA-logo-small-1.png\",\"width\":149,\"height\":50,\"caption\":\"Next Level Purchasing Association (NLPA)\"},\"image\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/logo\/image\/\"},\"sameAs\":[\"https:\/\/www.linkedin.com\/company\/next-level-purchasing-association\/\",\"https:\/\/www.youtube.com\/channel\/UCrNZYjcLcaNA4xMKQHEGamw\",\"https:\/\/www.facebook.com\/NextLevelPurchasing\/\",\"https:\/\/twitter.com\/nextlevelpurch\"]},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/person\/72d094fab77892483dfa6e061cb27eaa\",\"name\":\"Galo Matagay\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/34d4be7be9c43eeb480e7e32739c2f3f?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/34d4be7be9c43eeb480e7e32739c2f3f?s=96&d=mm&r=g\",\"caption\":\"Galo Matagay\"},\"description\":\"Lorem ipsum dolor sit amet, consectetur adipiscing elit. Aenean consequat rutrum ipsum quis iaculis. Duis non porta purus, tincidunt tristique mi. Cras eleifend tincidunt mollis. Aliquam egestas velit vitae interdum egestas. Aliquam vel lorem egestas lectus porttitor volutpat nec sit amet enim. Nullam bibendum vestibulum imperdiet.\"}]}<\/script>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"What is a Purchase Order and How Does it Work? - Next Level Purchasing Association (NLPA)","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-a-purchase-order\/","og_locale":"en_US","og_type":"article","og_title":"What is a Purchase Order and How Does it Work?","og_description":"A purchase order (PO) is a commercial document and first […]","og_url":"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-a-purchase-order\/","og_site_name":"Next Level Purchasing Association (NLPA)","article_publisher":"https:\/\/www.facebook.com\/NextLevelPurchasing\/","article_published_time":"2019-11-18T06:08:46+00:00","article_modified_time":"2021-03-29T06:25:17+00:00","og_image":[{"width":651,"height":725,"url":"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2019\/11\/purchase-order.png","type":"image\/png"}],"author":"Galo Matagay","twitter_card":"summary_large_image","twitter_creator":"@nextlevelpurch","twitter_site":"@nextlevelpurch","twitter_misc":{"Written by":"Galo Matagay","Est. reading time":"3 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-a-purchase-order\/#article","isPartOf":{"@id":"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-a-purchase-order\/"},"author":{"name":"Galo Matagay","@id":"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/person\/72d094fab77892483dfa6e061cb27eaa"},"headline":"What is a Purchase Order and How Does it Work?","datePublished":"2019-11-18T06:08:46+00:00","dateModified":"2021-03-29T06:25:17+00:00","mainEntityOfPage":{"@id":"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-a-purchase-order\/"},"wordCount":504,"commentCount":0,"publisher":{"@id":"https:\/\/www.certitrek.com\/nlpa\/#organization"},"articleSection":["Procurement"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-a-purchase-order\/#respond"]}]},{"@type":"WebPage","@id":"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-a-purchase-order\/","url":"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-a-purchase-order\/","name":"What is a Purchase Order and How Does it Work? - Next Level Purchasing Association (NLPA)","isPartOf":{"@id":"https:\/\/www.certitrek.com\/nlpa\/#website"},"datePublished":"2019-11-18T06:08:46+00:00","dateModified":"2021-03-29T06:25:17+00:00","breadcrumb":{"@id":"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-a-purchase-order\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-a-purchase-order\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-a-purchase-order\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.certitrek.com\/nlpa\/"},{"@type":"ListItem","position":2,"name":"What is a Purchase Order and How Does it Work?"}]},{"@type":"WebSite","@id":"https:\/\/www.certitrek.com\/nlpa\/#website","url":"https:\/\/www.certitrek.com\/nlpa\/","name":"Next Level Purchasing Association (NLPA)","description":"The Next Level Purchasing Association","publisher":{"@id":"https:\/\/www.certitrek.com\/nlpa\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.certitrek.com\/nlpa\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.certitrek.com\/nlpa\/#organization","name":"Next Level Purchasing Association (NLPA)","url":"https:\/\/www.certitrek.com\/nlpa\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/logo\/image\/","url":"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2020\/08\/NLPA-logo-small-1.png","contentUrl":"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2020\/08\/NLPA-logo-small-1.png","width":149,"height":50,"caption":"Next Level Purchasing Association (NLPA)"},"image":{"@id":"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.linkedin.com\/company\/next-level-purchasing-association\/","https:\/\/www.youtube.com\/channel\/UCrNZYjcLcaNA4xMKQHEGamw","https:\/\/www.facebook.com\/NextLevelPurchasing\/","https:\/\/twitter.com\/nextlevelpurch"]},{"@type":"Person","@id":"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/person\/72d094fab77892483dfa6e061cb27eaa","name":"Galo Matagay","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/34d4be7be9c43eeb480e7e32739c2f3f?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/34d4be7be9c43eeb480e7e32739c2f3f?s=96&d=mm&r=g","caption":"Galo Matagay"},"description":"Lorem ipsum dolor sit amet, consectetur adipiscing elit. Aenean consequat rutrum ipsum quis iaculis. Duis non porta purus, tincidunt tristique mi. Cras eleifend tincidunt mollis. Aliquam egestas velit vitae interdum egestas. Aliquam vel lorem egestas lectus porttitor volutpat nec sit amet enim. Nullam bibendum vestibulum imperdiet."}]}},"acf":[],"_links":{"self":[{"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/posts\/1149"}],"collection":[{"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/users\/12"}],"replies":[{"embeddable":true,"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/comments?post=1149"}],"version-history":[{"count":3,"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/posts\/1149\/revisions"}],"predecessor-version":[{"id":10606,"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/posts\/1149\/revisions\/10606"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/media\/1154"}],"wp:attachment":[{"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/media?parent=1149"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/categories?post=1149"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/tags?post=1149"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}