Why Do I Need to Provide a PO?
Some of our clients may wonder why we are asking that a Purchase Order, or PO, be provided everytime they send us product. Why can't the warehouse just receive a product and add it to inventory, without the extra fuss and bother? A PO is beneficial to all parties involved. The client who is purchasing product, the vendor, and ShipZOOM as the fulfillment center.
One important thing to remember is that a PO is not an invoice. Invoices and POs are both important, but serve separate purposes. For today's discussion, we refer to invoices, but they are not the same form. A purchase order (PO) is created by the buyer, and outlines exactly what they expect to receive. An invoice is issued by a vendor or supplier who requests payment.
What are 7 Benefits of Using POs? (aka, How a PO Helps YOU, the Client)
Procurify.com has given some very good reasons to implement a PO system for your business.
1. They help prevent duplicate orders
- With a small business, it may not be difficulat to track each order and shipment. But as a company or brand grows, a PO can keep track of what is ordered, by whom, and when.
2. They are required for some financial audits
- Certain financial audits may require evidence of approved purchases, and all documentation related to those purchases.
3. They can help you avoid surprise price increases
- If a supplier changes price between the date of order and the date of delivery, a purchase order clarifies the agreed upon price for both parties and clears up potential miscommunication.
4. They keep track of incoming orders
- For ShipZOOM's receiving department, this is ESSENTIAL! We will know in advance what to expect, when to expect it, and how much to expect.
- Inventory management is much simpler when there is a record of the what, when, and how much.
5. They help keep invoices in check
- When making repeat orders of identical or similar products, matching invoices to orders can be tedious without documentation. Incuding a PO on the invoice avoids confusion.
6. A PO ensures clear communication
- This is at the core of why ShipZOOM asks for POs for all incoming shipments. They clearly communicate and document all of the details of a purchase, thus avoiding potential conflict or confusion in the future.
7. They are legal documention
- Purchase orders are documentation of what was ordered, the agreed upon price, and all of the details of each transaction. They protect all involved parties by recording the agreed upon details.
What are the 7 Important Elements of a PO?
According to Intuit Quickbooks, these are the important elements of a PO.
1. Name of the company making the goods or supplying the service
- This shows all parties who is involved in every purchase.
2. Purchase Order number
- This is a unique reference that will allow matching of purchases with what is being ordered and what will be delivered. The number is essential for proper tracking of purchases.
- A PO number also ensures that your invoice gets processed quickly and it minimizes the risk of incorrect payments.
3. Purchase Order Date
- An official record as to when an order was placed and when it was delivered.
4. Delivery & Invoice Address
- This will ensure all correspondance and deliveries end up in the correct places, reducing the risk of late deliveries and payments.
- In the case of using ShipZOOM as a fulfillment center, it is important that the supplier has our correct address information. There would be a separate billing address for client.
5. Description and quantity of the goods or services
- Ensures no doubling up or incorrect purchases were made.
- Makes it faster and easier for receiving to be completed.
- NOTE: if a SKU and/or barcode is listed, and products are properly labeled, it is even better! There is no question of which items are in the shipment.
6. Agreed prices
- This is essential as it leaves no wiggle room for price increases from the supplier without the client's knowledge. Having price(s) listed on a PO also allows the client to track pricing history with vendors.
- Include taxes and total price.
7. Payment information
- Let's purchasers know exactly where payment should be made to prevent any delays in the process.
Now that you understand the benefits of using purchase orders, and you know the essential elements to include in a purchase order, you can decide if there is a specific software service to use, or if you want to create your own template.
Every time an order is placed, create that PO and send to both the vendor and your ShipZOOM shipping manager. Your shipping manager ensures that the PO is recorded in our SKUVault system, so when the items arrive, receiving easily handles the counting and recording into inventory. When we do not have an invoice in place for a shipment, there are delays as the receiving department contacts the shipping manager, and the shipping manager contacts the client to get all of the necessary information.
Always feel free to reach out to a shipping manager for clarification and questions!