A purchase order lists all the relevant details that are required by both the customer and the business that sells the product and creates an invoice that can be tracked by them. Usually, a template or format is followed while preparing a purchase order.
A purchase order number, customer number, order date.
Quantity of the product/service and the price per unit.
Tax rates and discounts if applicable.
Authorized signature of buyer.
Delivery information and billing details.
Payment terms (fixed time period/on the day of delivery of the product).
Following a purchase order template simplifies the business process, by keeping track of all transactions that are either processed or not. A purchase order also helps businesses improve their inventory accuracy - by letting them know in advance if they have the bandwidth to deliver certain products to customers.
Usually, buyers who are interested in purchasing a product from a business, request for a PO form. Once issued by the business, the customers complete the form by filling up their requirements and send it back. If the business can satisfy the customer’s needs, the purchase order gets approved. All necessary details, such as the billing information, payment date, and delivery information are included in that PO and an invoice is created.
PO helps both businesses and customers. The customers can schedule their payments and the delivery of the product they ordered, while the businesses can keep track of all their orders, and improve their financial accuracy. In cases where multiple orders are placed over a certain period of time, a blanket order is used.
More reads about Purchase Order for subscription businesses:
From increasing cash flow to improving retention to delaying churn, Annual Contracts play a vital role in SaaS. How to Account for Revenues and Expenses with Annual Contracts in SaaS?
Where does an invoice come into the picture? The 7 Essential Elements of an Effective Invoice.