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Purchase Order Format
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The purchase order format:
A purchase order is a written sales contract between buyer and seller detailing the exact merchandise or services to be rendered from a single vendor. The purchase order format usually contains: PO number, shipping date, billing address, shipping address, terms of payment (usually in the form of NET 30, NET 45 and NET 60 depending on requirements set by the seller), and a list of services or products, often including specifications and reference or part numbers of the items to be purchased, with quantities and prices. When accepted by the seller, it forms an agreement between buyer and seller . The terms and conditions should be stated (see purchase order format sample above).
The use of purchase order forms:
There are several reasons why companies use purchase orders. They allow buyers to clearly communicate their intentions to sellers, and in the event a buyer refuses to pay for something which was sent, protects the seller. For example, say Person A works for Company A and orders some parts from Person B at Company B. There could be a problem if Person A didn’t actually have authority to authorize this order – maybe they thought they had the boss’s permission but there was a miscommunication. So, the order gets returned and Company B loses money. Depending on the situation, Company B might only lose shipping and packing costs, but they might lose significant manufacturing labor and materials costs and other expenses. They might lose the product entirely (for example, if it is perishable).
In order to prevent such problems, sellers often request purchase orders forms from buyers. This form represents the buyer’s intent to purchase specific quantities of product at specified prices. In the event of non-payment, the seller can use the PO as a legal document in a court of law to demonstrate the buyer’s intent and to facilitate collection efforts. Companies usually request purchase orders when doing business with other companies for orders of significant size, as the purchase order reduces the risks involved.