Purchase Order Procedure Definition
A purchase order (PO) is a commercial document and first official offer issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services. It is used to control the purchasing of products and services from external suppliers. POs are generally generated internally within a company by authorized personnel and sent to an external supplier as an official offer to purchase specific products or services at specified prices. A PO is legally binding on the issuer once it is accepted by the supplier.
The PO procedure definition typically begins with a requisition, which indicates a need for goods or services within a company. The requisition initiates the PO process and usually includes details such as:
-the quantity of goods or services needed
-a description of the goods or services
-the delivery date
-the budget code for the expenditure.
Once the requisition has been approved, a PO can be generated. The PO should include:
-the name and address of the supplier
-a detailed description of the goods or services being purchased
-quantities of each item ordered
-agreed upon prices for each item
-delivery date(s)
-any special instructions or terms (such as payment terms).
Once the PO has been approved by the relevant parties, it is sent to the supplier. The supplier then has the option to accept or reject the PO. If they accept, they are legally
