There are a lot of perks to operating a small business online. You don’t have to pay monthly overhead for a brick-and-mortar store. You can work in your pajamas at noon or while pacing on a treadmill at midnight. You get to setup your own processes as well, and that includes an effective purchase order process.
Wait, what? You have to generate purchase orders (POs) whenever you want to buy something for your e-commerce business? I thought we were talking about the benefits of operating an online business!
Yes, POs are still necessary for your business, especially in the realm of indirect procurement. It doesn’t matter whether you operate entirely online, in a brick-and-mortar storefront, or both. Some paperwork is necessary to protect your business and minimize the risk of costly mistakes. An efficient purchasing process complete with well-designed POs, particularly in the context of indirect procurement, is one of the most important processes you will create as a business owner.
Creating purchase orders for an online business may not seem like a perk, but it's actually a critical element of successfully running an online business. POs help to ensure that orders are accurate, that payments are made on time, and that there is a clear record of all of your purchases. This information can be incredibly useful for budgeting and forecasting, as well as for tracking inventory and sales. Plus, creating purchase orders can help you to get better deals from vendors and suppliers, as they may offer discounts or other incentives for ordering in bulk.
Finally, purchase orders can help you to streamline the payment process by providing a standardized way to submit orders and payments. All of these benefits can result in increased efficiency and profitability for your online business.
Intro to Purchase Orders
Purchase orders are created by the purchaser and delivered to the supplier. They detail the products or services needed along with price and other important details. For many e-commerce business owners, filling out the PO is the final step in the purchasing process. They make their final buying decisions and put it in writing, verifying all details before passing it to the supplier.
If multiple people need to sign off on large purchase, the PO is an easy way to communicate clearly. One person or department can create the order and then other interested parties can review it before it’s delivered.
If you’re still thinking that you purchasing decisions are just fine without this added step in your purchase order system, stick around a bit longer. We’re about to tell you how simple POs make your life as a small business owner easier and even safer.
Are purchase orders right for your retail store?
There are valid reasons for using POs when you place orders with vendors or receive orders from customers. When you receive orders from a purchaser, the PO makes it easy to track unfulfilled orders, order stock in advance, and then compare the purchase against the invoice to ensure accurate fulfillment.
When you place orders with other suppliers for your business, the PO allows you to legally document your order. You will have proof of what you ordered, including the quantity, pricing, and payment terms. Keeping POs on hand for all fulfilled orders makes it easy to look at past orders for legal purposes. You can also look at past purchase orders when deciding what to reorder in the future.
Most e-commerce businesses need an organized purchase order system. If you know that your purchase order process is far from perfect right now, we’re about to tell you everything that you need to know to fix the problem. It starts with an understanding of the PO structure.
What’s the structure of a PO?
There are 10 basic features that appear on most purchase orders. You may add some information or omit some of these features, customizing your PO to your business needs.
- PO Number – Every PO generated receives a number for tracking purposes. This number is also listed on the coordinating invoice as well.
- Product Description – Each product ordered is identified with a brief description.
- Technical Specifications – Specs are added to identify sizes, colors, model numbers, and other technical specs for ordered products.
- Unit Quantity – Identify the quantity ordered for each product or service package on the PO.
- Price Per Unit – Identify the price for one unit of each product or service package on the PO.
- Total Price – The total price, including all products and services on the PO.
- Delivery Date – Set the date that the supplier will deliver the order or fulfill the service.
- Delivery Location – Identify the address where the supplier will deliver the product or service, if applicable.
- Billing Address – Set the address associated with the purchaser’s location and/or banking information.
- Payment Terms – Clearly state the specific terms of payment, as agreed upon by supplier and purchaser.
Benefits of Purchase Orders for e-Commerce
We’ve already identified some of the most basic reasons that e-commerce business owners use purchase orders, but there’s more! In addition to basic tracking and documenting, you have a lot to gain by implementing POs in your purchasing process. Let’s take a look at the most important benefits before we discuss the different types of orders used for purchasing.
Provide Legal Protection
What happens when you order 40 white blanks for your online t-shirt business and receive a mishmash of shirts in five different colors? Your first impulse is to contact the vendor to have the order corrected, but what if their record of your order differs from what you know you ordered?
Discrepancies like this are time-consuming on both sides, but they’re also avoidable. When you implement a thorough purchase order system that includes a PO signed by both parties, you create a legal document that holds everyone accountable to their end of the agreement.
If there’s a dispute over pricing, quantities, or technical specs for an order, you can refer to the purchase order. That quickly solves a problem that may otherwise ruin a good working relationship or even lead to legal troubles.
Simplify Order Tracking & Inventory Management
You may start your e-commerce business with just a few orders for supplies here and there. You may simply pay with your debit or credit card and click a tracking link through email. As your business grows, it becomes more difficult to track a larger number of purchases and potentially more expensive orders. That’s where purchase order software becomes an asset. You assign each purchase order a PO number and then track orders to ensure they are accepted by the vendor, fulfilled, paid, and completed.
Technology has improved the purchase order process to ensure you always know how much you’re paying for an order plus when and where your vendor will deliver. When using the software for your business, you can include inventory in the process, ensuring products are reordered quickly to avoid supply chain issues.
What’s coming in, and what’s going out? That’s important information for every small business, and a purchase order system keeps you informed at all times.
Less Painful Audits
No one wants to think about getting audited, but the potential is a reality for every business owner. While working with purchasing software offers no protection, it can make the auditing process easier if it does happen to you. You can use your POs to show your business purchases over any length of time. The days of rifling through hundreds or thousands of paper receipts or printing endless emails as evidence are over.
Keep Vendors Organized
A lot of order fulfillment mistakes come from misunderstandings between the purchaser and supplier. Details can get lost in a long email chain. Verbal orders placed over the phone leave your order at the mercy of someone else’s memory or notetaking skills. There are also language barriers and other issues that can lead to wrong orders.
When you use a purchase order system, you provide every detail of your order in writing. The vendor reviews the PO and signs to verify that they understand the order and are able to fulfill it on time. If they have their own system for purchasing set up, your PO makes it easier for them to track their own orders and inventory.
When you use a dedicated purchase order process, you always know exactly what you will pay for an order. When someone provides a PO for your products or services, you can verify that their pricing expectations are accurate and sign off to make it official. There’s less room for surprises and disagreements over what one party is paying and other expects to receive.
You may find that there are other benefits of using professional purchasing software for your business. Now that we’ve covered some of the biggest perks that apply to all businesses, it’s time to look at the different types of purchase orders and how they may apply to your business.
The Significance of Purchase Orders Template in Streamlining Procurement
Harnessing the efficiency of purchase orders templates is akin to setting a foundational pillar for your hardware startup's procurement processes. A well-structured template not only provides a standardized format but also ensures consistency in capturing vital order details. With the dynamism that hardware startups usually display, any tool that fosters streamlined, repeatable, and error-free operations is invaluable. Such templates, when embedded within an automated purchase order system, become the bedrock for speed, accuracy, and scalability. In essence, while automation is the engine driving the procurement car, the purchase orders template is the blueprint ensuring the car is built to perfection.
Types of Purchase Orders
You don’t have to overcomplicate or reinvent purchase orders. Business owners love to brand and customize every piece of paper and digital product that they use, but you don’t have to make your purchase order system complicated. You can copy from a standard PO and add your own details to get started instantly. You can also utilize a software that creates the PO form for you in no time. It still helps to understand the most common types of POs because you may have a need for something beyond the standard format.
Standard or Single-Use Purchase Orders
This is your basic PO used for simple or one-time purchases. It contains all the details from product or service information and quantity to payment and delivery terms. You keep this on hand and fill it out quickly when you order from a supplier without an ongoing contractual relationship.
If you just want to keep this simple, go with a standard purchase order template. It will contain everything you need to communicate with your vendors to place an order quickly.
Planned Purchase Orders
When you enter an ongoing agreement with a vendor, your purchase order system can get messy and confusing. You could use your standard PO form and offer one for every stage of the agreement, but that makes it difficult to track where you are in the order and fulfillment process.
Planned purchase orders allow you to cover large orders even if they’re delivered in installments over time. They make it easier to document ongoing relationships while making sure that both parties are up to date and aware of the next step to take.
Blanket Purchase Orders
Think of this as a less detailed PO. It may seem like the simplest or most basic option for one-time or occasional orders, but that’s still the standard PO. Blanket POs are more like acknowledgements that you intend to purchase specific products or services from a supplier or vendor in the future. The order doesn’t bind you to specific quantities or dates, so it’s more open ended.
Contract Purchase Orders
Contract POs are simple and efficient ways to create a binding contract between two businesses. You essentially lay out the details of how you will work with one another, including payment terms. Once signed by both parties, you have a valid contract that sets expectations for future purchasing deals.
Not every e-commerce business will need contract or blanket orders. It’s still great to have a dedicated purchase order system that allows you to use them when necessary.
How to Generate a Purchase Order
At this point, you’re likely sold on the value of purchase orders. You know the benefits for your business and understand that getting a purchase order process in place now will make it easier to manage your business as it grows. Even if you use very few POs now, that is likely to change gradually over time. You may even experience rapid growth, in which case, you will thank yourself for simplifying the purchasing process early on.
If you’re already experiencing that growth and are noticing issues with inventory management, order fulfillment, and tracking, now is the time to learn how to generate a purchase order. You have three basic options.
Manual PO Generation
You can create a purchase order manually, using any program already available to you. Some business owners are more comfortable with Word or another word processing program. Use the list of what’s included on a PO, which we presented earlier in this discussion. You can look at purchase order templates online to get an idea of the basic format.
The problem with manual PO generation is that you have no simple way to store and track your orders. It also takes a lot more time to create the form than one of your other options, which we’ll discuss in a moment.
Spreadsheet PO Generation
Excel or another spreadsheet is another option if you want to create your PO manually. You can even use a template that automatically loads into Excel to make it faster and easier. Again, this system generates a PO but doesn’t give you a clear purchase order system with tracking for orders and inventory management. You can create that system on your own or use our final—and most highly recommended—option for generating purchase orders.
Free PO Generator
When you take advantage of purchasing software, you can take the work out of creating your purchasing system. We highly recommend the free PO Generator from ControlHub. It allows you to quickly fill in the blanks to provide important information to feature on the PO. You can then download a professional template in PDF format.
This generator eliminates the time-consuming process of finding a suitable PO template online or playing with a spreadsheet or word processing program to get every field just right. You generate your template, download, and implement it into your purchasing process instantly.
This generator is simply an efficient way to create a PO quickly. It doesn’t send the PO out for approval or offer any tracking capabilities. You need Purchase Order Automation for that, and we’re going to touch on that before leaving you to create your new purchase order process.
Purchase Order Automation
Automation refers to advanced technology that limits input and work from humans. We’re talking about digital applications that allow you to get more done in less time by allowing a computer to do a lot of the work for you. For instance, you no longer have to walk into your bank during operating hours to check your balance or withdraw cash. You just log onto your bank’s mobile app or drive through the ATM.
The same concept is now applied to purchasing through advanced purchase order software. Purchase order automation allows software to do everything from generating professional and complete purchase orders to assigning PO numbers and sending POs for approval digitally.
Imagine how much time you could save if you could fill out a PO, send it to others within your business for authorization, and then send it to a vendor through your computer or mobile phone. Automation software eliminates the messy paper trail, dramatically reducing the risk of lost purchase orders. It also speeds up the process so you can get more done in less time.
Oh, and did we mention that automation software is much easier for your vendors and suppliers? They save time along with you.
How Purchase Order Automation Works
If you decide to create your purchase order system manually, you’ll spend time generating PO forms and then filling them out, printing, scanning, delivering each one by hand. The process may involve multiple people within your business, which means a lengthy process each time you need to send out a PO.
Working with automated purchasing software eliminates all the manual work. Each step of the purchasing process is completed within the software. Each person involved in the process has access to the software, creating a smooth workflow that passes up the chain effortlessly and with far less risk of human error. We’re all prone to those, right?
Here’s a quick breakdown of how the process works in general. The specifics will vary, depending on the software you implement.
- You or another authorized company representative creates a PO within the software. They simply fill out the required information, including the target supplier or vendor.
- The system to generates the completed PO form instantly.
- The PO form is digitally reviewed and/or signed by all necessary parties within your business.
- The system sends the PO directly to your vendor or supplier.
- You receive notification that your vendor or supplier has signed the PO, making the purchase agreement binding.
- You track your orders using their PO numbers, ensuring every step of the payment and fulfillment process is completed on time and in accordance with the agreement.
Benefits of PO Automation Tools
Does it seem like there’s a software solution for everything these days? If so, why should you consider one more program like automated purchasing systems? There are some clear benefits for any e-commerce business, including but not limited to:
- You always know how much money you have committed to spend on current and future purchases.
- The purchasing process is simplified for employees at all levels.
- Everyone involved in the purchase process saves time by allowing the computer to do the work.
- Everything is saved in one organized place without messy stacks of paper or heavy fling cabinets.
- You can quickly pull up any PO to check its status or obtain needed information.
- Far less risk of costly or time-consuming errors.
Frequently Asked Questions
Why do I need purchase orders for my online business?
Purchase orders are a critical element in running a successful online business. They ensure accurate orders, timely payments, and a clear record of your purchases. They also help with budgeting, forecasting, inventory tracking, and even scoring better deals from suppliers. Purchase orders provide legal protection and streamline operations, making them essential for any online business.
What exactly is a purchase order?
A purchase order is a document you create to communicate your purchasing needs to suppliers. It includes important details such as the products or services, prices, and specifications. It ensures that everyone is on the same page and helps streamline the purchasing process.
Do I really need purchase orders for my online store?
Yes, absolutely! Purchase orders are your secret weapon for seamless operations. They provide legal protection, simplify order tracking and inventory management, make audits easier, and keep your vendors organized. Purchase orders also make budgeting a breeze, giving you control over your expenses and ensuring transparency.
What are the different types of purchase orders?
There are different types of purchase orders to suit various situations. The most common types include:
- Standard or single-use purchase orders: for one-time purchases.
- Planned purchase orders: for ongoing agreements with vendors.
- Blanket purchase orders: for open-ended or occasional orders.
- Contract purchase orders: for creating binding contracts with other businesses.
Choose the purchase order type that best fits your online business's needs.
How can I generate a purchase order?
Generating a purchase order is easy! You can manually create them using programs like Word or Excel, but it can be time-consuming and prone to errors. Alternatively, you can use a free PO generator like the one from ControlHub. It provides a professional template in PDF format, making it quick and hassle-free.
What is purchase order automation?
Purchase order automation is the process of using software to streamline and automate the creation, approval, and transmission of purchase orders. It eliminates manual tasks, reduces errors, and saves time. With automation software, you can generate complete purchase orders, get digital approvals, and send them directly to your vendors, all from your computer or phone.
How does purchase order automation benefit my online business?
Purchase order automation keeps your finances in check, simplifies the purchasing process, saves time, organizes everything in one place, and minimizes errors. It improves efficiency, ensures accuracy, and keeps everyone involved in the loop. By automating your purchase orders, you'll have more time to focus on growing your online business and providing excellent service to your customers.