Write the procedure for placing order for some essentials describing the process of payment and protocol to be followed.
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Answers
Why do companies use purchase orders?
Purchase orders are used for several reasons:
They set clear expectations – Purchase orders enable purchasers to clarify their exact needs to vendors. Not only does this help ensure that you get off on the right foot, but both parties can use it as a formal check in case orders are not delivered as expected.
They help manage orders – Many businesses designate certain individuals to manage inventory, which typically includes processing incoming orders. These individuals are typically in procurement, finance, or operations. Purchase orders give these individuals official documentation of incoming or pending deliveries, enabling them to track and manage orders more effectively.
They help with budgeting – Once a purchase order is created, purchasers can immediately factor these costs into company budgets. Businesses benefit from having clear records of exactly how much money is being spent and where it’s going.
They are legally binding – We are often asked whether a purchase order is legally binding. The answer is now officially yes, per the 2014 court case, MidAtlantic International Inc. vs. AGC Flat Glass North America Inc. In this case, a federal court determined that purchase orders are an enforceable contract between two parties. In the absence of a formal contract, a purchase order can serve as a legally binding document only after it is accepted by the vendor.
They are a key part of audit trails – Auditors are on the lookout for financial discrepancies. They’ll be particularly interested in goods and services coming in and payments going out. Issuing, processing, and recording purchase of light. Orders are made in passing over the phone, via email, and even through texting. Foregoing formal confirmation of an order means that you or your vendor may forget important order details.
Some institutions do not require a purchase order for certain items. We’ll
Ordering office supplies online from the university’s
The following are the steps in the purchase order process. Note that the purchase order process is one part of a broader procurement process that includes everything from identifying the need for a good or service to payment. Read our blog post on the entire procurement process here.

Step 1: Purchaser creates purchase requisition – The purchase order process starts with a purchase requisition, a document that is created by the purchaser and submitted to the department that controls finances. Consider this the part of the process where you get the thumbs up to purchase the goods and services you want. You’re not actually ordering anything, you’re getting the approval to do so. Approvers can choose to approve, reject, or flag your request for further discussion. The key difference between purchase requisitions and purchase orders is that a purchase requisition is about permission and purchase orders are about purchasing. Read our blog post on purchase requisitions vs. purchase orders for a detailed description of these two documents.
Step 2: Purchaser issues purchase order – Once the purchasing or procurement department has approved the purchase requisition, it issues a purchase order to the vendor. In essence, POs place the order. Purchase orders are typically created using electronic purchasing systems like PurchaseControl, which enable businesses to track POs and submit them electronically.
Step 3: Vendor approves, rejects, or submits PO for discussion – The vendor will review the purchase order thoroughly, paying close attention to quantities, prices, total amount due, and terms and conditions. Once the vendor approves the purchase order (usually via email or using an e-procurement software), they prepare the goods or services to be delivered. If they do not have an item that is being purchased or if there are other concerns with the order, it is flagged and sent back to the purchaser for further discussion.
Step 4: Purchaser records purchase order – The final step in the purchase order process consists of the purchaser recording the PO. As mentioned earlier, filing purchase orders is a good habit in case of an audit.
Once these steps in the purchase order process are complete, the goods or services are delivered and inspected. Thereafter, the vendor issues an invoice to the purchaser, payment is made, and the transaction is complete.
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