In the case of a sale, the purchase order isn’t obligatory. Commonly used, it simply provides additional security for the transaction. This is in contrast to an invoice, which is obligatory at the time of purchase.
In fact, the purchase order is a kind of commitment between buyer and seller. It commits the seller to obtaining the product from its supplier within the agreed timeframe. The customer, meanwhile, agrees to pay for the product.
To be valid, a purchase order template must contain several items of information, which can vary depending on where the seller is based. Here are some details that are generally included in a purchase order:
- identity of the sender, i.e., company name, address, phone number, name of the contact person, etc.;
- identity of the recipient, with the same information as for the sender;
- product details, i.e., product name and description, product code or SKU number
- quantity ordered, price and tax amount, etc.;
- order date;
- purchase order number;
- delivery date;
- method of payment;
- terms of delivery; and
- cancellation period, if any.
It should also be noted that the order form should be attached to the business’s general sales conditions.
The purchase order has several functions. It is used to do the following:
- Validate a promise to sell and enforce an agreement between the customer and the company.
- Defend oneself in the event of disagreement, with the help of general sales conditions.
- Improve inventory management and replenishment.
As you can see, while they’re not legally required, purchase orders are highly recommended documents that can prove invaluable allies in the selling process.
