In today’s new, almost paperless society, there are a lot of companies that think they don’t need to use purchase orders. Without invoice processing services, things can get out of hand quickly. It can be a problem when it comes time to complete a project and you lack one small item. Can you take money out of the till, or should you use your personal cash, save the receipt and hope to get paid in a few months? These quandaries transpire thousands of times per day across the country, all because owners and managers don’t have an efficient purchase order system in place.
The System Needs to Be Strong and Implemented Already
Some small parts, accessories, or other items can hold up and entire project or stop the company from functioning without them. Maybe the printer in out of ink, the forklift needs a new key made, or there are no more labels for shipping packages. If you don’t have a solid solution to every problem like this in advance, you’ll end up getting calls from your employees on a regular basis.
By setting up the system with purchase orders and a group of vendors ahead of time, then teaching managers or employees how to order critical items when needed, you can be assured that the entire company won’t stop for a lack of one small part.
Purchase Orders Help to Track Inventory
If your main office is the source of most of your goods, then you need to track inventory to know how much of everything that is purchased so that they can order in advance and eliminate panic buys. They can order enough toilet paper so that there is always an extra case on hand. They can buy in bulk and have it delivered with their normal freight and avoid the high prices of shipping individual items on a rush basis.
Purchase orders are also an excellent way to limit employee theft since there is a paper trail for every purchase made. If the common practice of pulling money out of the cash register gets out of hand, more money will always be missing than there are receipts to match. Plus, with a purchase order, there is a carefully defined quantity, part number and price that allows the purchasing department to monitor everything.
Purchase Orders Compared to Invoices
These two documents are often confused but the purchase order is initiated at the buyer and then sent to the vendor or seller. Then the seller fills the order, while checking off the items individually on the PO, and then sends the filled order back to the buyer. Sometimes there are two copies of the purchase order sent to the vendor, one stays there, and the other is returned to the buyer.
Then, at the end of the week or month, all of the purchase orders from each buyer are added up and entered onto an invoice. The invoice may not have all of the individual part numbers listed but instead, just a list of purchase orders that were filled and are now due to be paid. So, the invoice originates at the vendor and is sent to the buyer to request payment.
There Are Also Non-PO Invoices as Well
These happen when a company doesn’t have a regular PO system in place in advance. Then the products will be sent from the vendor with what is called a Non-PO Invoice which essentially means they didn’t receive a PO. These are still binding agreements but are harder to track, there can be confusion on either end, and sometimes they are harder to get paid on too.
When it comes to operating a business, having purchase orders and invoices with a strong educational system in place to teach everyone how they are used is essential. As soon as confusion enters the process, one side or the other might not get paid what they are due, the wrong products sent, or the wrong quantities. Either way, it’s best to have everything in writing from start to finish.