Different Types of Purchase Orders
What is a Purchase Order?
A purchase order (PO) is a legally binding document issued by a buyer to a seller, detailing a purchase transaction. It basically acts as a formal request for whatever you’re buying, and specifies quantity, price, delivery date, etc.
Why Should I Use Purchase Orders?
- Clear Communication: POs are the easiest way to keep concise records of all goods requested, and by having everything in writing you can avoid having any misunderstandings with your suppliers.
- Control Spend: By issuing a PO you can establish a budget for every purchase, and have an idea of what you’re spending before you spend it.
- Legal Protection: Purchase orders are legally binding, protecting both you and your suppliers in case of unexpected disputes.
- Inventory Management: When you know exactly what you’re ordering and when it’ll arrive, you can precisely track incoming goods and keep on top of your stock.
How do I create a purchase order?
The easiest way is to use our Purchase Order template and simply personalise it with your own details! Whether you use a template or not there are some essential details you must include:
- PO number
- Date of the purchase order and delivery date
- Your company name and contact information
Vendor company name and contact information
- Billing address
- Shipping address
- Legal and payment terms
You may also want to include extra details like the line items.
How do Purchase Orders vary?
You may have noticed that POs can vary, and while they aren’t wildly different it’s still important to have an understanding of them.
Standard PO
We’re all familiar with this one. Standard purchase orders are made and issued for one specific order. A standard purchase order includes all purchase order details, including a purchase order date and delivery date. Easy!
Planned Purchase Orders (PPO)
Planned purchase orders are long-term contractual obligations with a commitment to buy products or services from a particular company exclusively over a period of time. This is one to use with your trusted suppliers. A PPO includes purchase order details, including estimated quantities and pricing, the billing account, card details, and tentative delivery dates.
Blanket Purchase Orders (BPO)
A blanket purchase order is an order that covers an entire contractual order with deliveries made by the vendor over a period of time. When needed, the customer requests or schedules deliveries for recurring purchases included in the blanket PO total. You may find that that you receive a discount on your items in return for committing to the long-term PO.
Contract Purchase Orders (CPO)
Contract purchase orders (CPO) are also called contract purchase agreements that set the terms for later issuing standard purchase orders specifying items or services being purchased. The standard purchase order includes a reference to the contract purchase agreement.
Digital Purchase Orders (DPO)
Digital purchase orders are electronic purchase orders created through an automated PO software. If you want to see a DPO in action, one of our experts at Zahara can give you a walk through!
