Why use Purchase Orders?


B

Blast

Why should my business use purchase orders? I have a restaurant and a
retail/service organization. Both have sales of $4,000,000 a year.
 
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W

Wayne Brasch

Blast said:
Why should my business use purchase orders? I have a restaurant and a
retail/service organization. Both have sales of $4,000,000 a year.
Purchase orders give a financial auditor more of a paper trail in testing
the status of the internal control (or lack of it) in your organization. If
you are subject to having financial audits performed, purchase orders may be
essential. They require that some level of management approves all
purchases for the company by signing off on them.

Wayne Brasch, CPA, M. S. Taxation
 
K

Ken Russell

POs also provide documentation of what was ordered in case of a dispute.
There is less ambiguity from a written order compared to a verbal one.

A PO documents item description, quantity, price, discounts, delivery
instructions, method of payment, and date of ordering. All important data I
would assume.

--
Ken Russell

(e-mail address removed)
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G

Gary V. Deutschmann, Sr.

Hi Blast

I have been in businesses where PO's were not used as well as they
were used.

Regarding customers who use PO's. I have one customer who places the
exact same order consistently. For a long time the billing amount was
the same also. But since crossing a certain total volume they have
been earning discounts, each bill is now $31.20 less than the previous
invoice.
But nonetheless, without using PO numbers, they would never know which
invoices were paid and which ones were still outstanding, since they
all were basically identical.

Many eons ago I too owned a small restaurant. We did not use PO
numbers, because only two of us could place orders.
But even then, sometimes orders were duplicated, both of us ordering
the same thing a couple of days apart.
After we expanded, 4 people could now place orders and using PO's
almost became a must. The numbers let me know who ordered and when
and I could match them up with the invoices.
We also had a lot less inventory shrinkage once PO numbers were in
place.

TTUL
Gary
 
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K

KEITH ALMAN

I would also add that a Purchase Order assist in validating the invoice for
payment to ensure that what is invoiced agrees with what was purchased for
both quantity and price (as evidenced by a purchase order.) This can be a
manual match or a computerized match using purchasing and accounts payable
software.
 
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