Purchase order number
Even a small business buys a lot of goods and services each year. In the business to business sales space, companies usually issue a purchase order for each item they purchase. It is issued by the buyer to the supplier, and creates a binding contract that stipulates the type and quantity of goods purchased, a price, payment terms, and other details.
However, keeping track of each purchase order is difficult without a purchase order number. This is a unique identifier for each document issued. Sometimes the PO number is simply sequential so that the first one issued is #1, and the next #2 and so on. However, other companies use different numbering schemes. For example, the PO number might specify a vendor first, using a numeric code. Then the next digits could be sequential.
How is a purchase order number helpful?
Arguably, the best benefit of a purchase order number is that it helps with accounts payable. For instance, the invoice sent with goods by the seller will usually include the PO number along with the invoice number. This way, both purchasing and accounts payable can track the order and issue appropriate payment.
Another benefit of these numbers is that you can match the number to each purchase requisition. In other words, it becomes obvious which department ordered the items and, therefore, which budget to debit from. You can also track inventory using the PO number in your purchasing software.
Finally, the purchase orders can help a seller with invoicing. That’s because it tells them at a glance what the purchaser is paying for their products, and how many they’ve agreed to sell. Then, it’s much easier to ensure accuracy with both quantities and prices.