If you optimise your Purchase Order Form by amending your Order Form template, it could save time and money, improve your Inventory Management, and increase your purchasing power as a buyer.
What are Purchase Order Forms?
Purchase Order Forms are 1- or 2-page documents issued by the Buyer, which describe goods or services to be purchased, quantity, price, delivery date, and other applicable requirements. These Forms plus their Terms & Conditions make up a Purchase Order – an important part of the Procurement and Purchasing process for small businesses through to large government organisations.
Purchase Order Terms & Conditions
Purchase Order Terms & Conditions may be set out either in the Purchase Order Form or in a separate document.
These Terms & Conditions contain the legal obligations, rights, responsibilities and liabilities that apply to the relevant purchase.
Purchase Orders
A Purchase Order Form plus a Purchase Order Terms & Conditions is together referred to as a “Purchase Order”.
When putting in place their Purchase Order template, organisations should include both of these documents.
Importance of Purchase Order Forms
Purchase Order Forms are critical for:
efficient Inventory Management and Purchasing;
maintaining accurate Purchasing records;
recording movement of inventory; and
preventing mistakes (such as over- or under-ordering supplies).
The Forms can also help reduce costs by ensuring that purchases are made at the most favorable price, and by keeping track of all the details of the purchase, including payment terms and due dates.
Key Information to Include in Your Purchase Order Form
There are several key elements that should be included in your Purchase Order Forms. These include:
Company Information:
Your company logo is usually at the top right of the Purchase Order template.
Basic Information
Your organisation’s name, Vendor name, Vendor representative details and Vendor address.
The date of the Purchase Order.
Seller’s contact information.
Item Description
The name of the item, quantity, unit prices, and unit.
Shipping Information
Delivery address, delivery date, shipping terms, shipping point and preferred shipping method.
Payment Information
Payment timing, method (eg one-off payment, payment against milestones, monthly recurring amount), cost (eg the payment the vendor receives), payment information, currency (noting there may be multiple currencies), any special pricing offered by the Vendor company and any applicable taxes or fees.
Additional Information
Any comments, special instructions, additional notes or other details related to the purchase.
By including all of this information, you can ensure that your Purchase Order Forms are complete and accurate and you have a solid Order template.
You also guide your staff in the information they need to include in order to carry out a Purchase in accordance with your organisation’s policies and procedures.
Common Challenges with Purchase Order Forms
Despite the importance of these documents, many organisations face challenges when it comes to creating and managing Purchase Order templates.
Some common challenges include:
Missing Information
If key information is missing from a Purchase Order, it can cause delays in the purchasing process or result in incorrect orders.
This is because the Purchase Order serves as the complete record of the purchase – the Purchase Order system cannot be updated without the necessary information;
Incorrect quantities
It is critical when your staff fill out the order details that they make sure the correct quantities are inserted.
This ensures that the organisation receives what it thought it was contracting for under the completed order.
Poor Organisation and Layout
If your Order template is difficult to read or understand, it can lead to errors or delays.
Temptation to rely on the business relationship rather than documenting a Purchase
This is a challenge that largely relates to culture of an organisation, and is very common in small businesses.
When your staff feel that there is more incentive not to enter into a contract, they may shake hands rather than issue a Purchase Order.
This problem can be largely addressed by strong leadership encouragement to issue POs as an official record of a Purchase, and discouraging handshake deals.
Regularly review your Purchase Order Form Template
To overcome these challenges, it’s important to have your Order template reviewed regularly and make adjustments as needed.
You may also want to use software or tools that can help automate the process and improve accuracy.
Best Practices for Optimising your Purchase Order Form Template
If you’re looking for ways to streamline your business processes, optimising your Purchase Order Form is a great place to start.
Here’s what you should do:
Simplify and streamline the Order template;
Ensure there is a smooth and quick process to create a purchase order;
Use clear and concise language;
Incorporate customisation options relevant for the Divisions, projects and staff who will create Purchase Orders (this may require different templates);
Some organisations allow their Purchase Order template to be fully customizable, while others strictly control the parts of a Purchase Order template that can be changed;
Use automation tools to reduce errors;
Ensure compatibility with your Inventory Management system; and
Incorporate tracking and reporting tools.
Make sure you test the new Order template before implementation.
And advise vendors and stakeholders as necessary.
Make sure you include reference to the Terms & Conditions
Don’t forget that the Purchase Order Terms & Conditions must be referenced in the Purchase Order Template if they aren’t physically in the same document.
Conclusion
Optimising your Purchase Order Form and Order template can lead to big improvements in Purchasing in your organisation.
A Purchase Order Template that is tailored to your organisation can help your staff save time and money, reduce errors, and improve Inventory Management.
Having a good Purchase Order template also lets your organisation be proactive (rather than reactive) when it comes to Purchasing.
By including all the necessary information in the Form, and addressing issues that frequently arise when your organisation purchases, you can create a more efficient Purchasing process that benefits your entire organisation.
So, speak with your Legal Division about reviewing and revising your Purchase Order Template, or contact a Strategic Contracting Advisor to make the necessary changes.
Be proactive with your Purchasing and your organisation will thank you.
Free Purchase Order Template
Click here to get your free Purchase Order Template.
Frequently Asked Questions (FAQs):
What is the purpose of a Purchase Order Form?
A Purchase Order Form is a legal agreement between a buyer and a seller for the purchase of goods or services. It outlines the details of the transaction, including the specific products or services being purchased, the quantity, the price, the delivery date, and any terms and conditions.
Purchase Orders help to standardise the Purchasing process and formalise requirements and pricing.
Purchase Orders also serve as a legally binding record of the goods or services ordered (and any conditions that attach to the purchase).
In some organisations, the main purpose for issuing a Purchase Order is to obtain the Purchase Order Number. In these organisations, it is the Purchase Order Number that gives their staff the approval to purchase any goods or services, rather than the physical Purchase Order itself.
Can a Purchase Order Form be customised for specific needs?
Yes, a Purchase Order Form can be customised to meet specific needs. Purchase Order templates can be drafted to include additional terms and conditions or requirements that are unique to the buyer or seller. If these requirements change over time, you should speak with your Lawyer or Strategic Contracting Adviser to tailor the Purchase Order template to your organisation’s current needs.
Who prepares the Purchase Order Form?
The Purchase Order Form is usually prepared by the buyer and sent to the seller. It can be generated manually (for smaller businesses) or through an electronic procurement system (for larger organisations). The Purchase Order template will be uploaded into the organisation’s Contract Management System, and the organisation’s Inventory Management System will allow quick and easy generation of Purchase Orders.
Can a Purchase Order Form be modified after it is issued?
Yes, a Purchase Order Form can be modified after it is issued and accepted, but both parties must agree to the changes in writing. The Purchase Order Terms & Conditions will govern any such modification, particularly any Variation clause.
What is the difference between a Purchase Order and an Invoice?
Purchase Order Forms are 1- or 2-page documents issued by the Buyer, which describe specific goods or services to be purchased, the quantity, price, delivery date, and other applicable terms and conditions.
Most Purchase Order Forms are accompanied by Terms & Conditions (either in the same document or in a separate document). These set out the legal obligations, rights, responsibilities and liabilities that apply to the relevant purchase.
An Invoice, on the other hand, is a document that is issued by the seller to request payment from the buyer for goods or services that have been provided (or are to be provided after payment).
These documents are usually 1-page, and are commonly titled, “Invoice” or “Tax Invoice”.
