Vendors are the People / Companies from
whom you purchase your goods for resale. Most times a Purchase Order is
produced by your Point of Sale to fax or email to the Vendor.
A Purchase Order (abbreviated PO) is a commercial document issued by
a buyer to a seller, indicating the type, quantities and agreed prices
for products or services that the seller will provide to the buyer.
Sending a PO to a supplier constitutes a legal offer to buy products or
services. Acceptance of a PO by a seller usually forms a once-off
contract between the buyer and seller so no contract exists until the PO
is accepted. POs usually also specify additional conditions such as
terms of payment, Incoterms for liability and freight responsibility,
and required delivery date. Many Point of Sale systems can generate,
send and receive (update orders) automatically.
Purchasing order forms an integral part of purchasing process in the POS
computer software. The respective department first make a purchase order
request, then the request is received by the purchasing department. The
purchasing department generates the purchase order. Parts of approved PO
are sent to seller, IT department, the respective department and
accounting department for future matching process.
A purchase order usually contains: PO number, shipping date, billing
address, shipping address, requested terms, and a list of products with
quantities and prices.
The reasons why companies use POs are several. They allow buyers to
clearly communicate their intentions to sellers, and they protect
sellers in the event that a buyer refuses to pay for something which was
sent. For example, say that Alice works for Company A and orders some
parts from Bob at Company B. There could be a problem if Alice didn’t
actually have authority to authorize this order--maybe she thought she
had her boss’s permission, but there was a miscommunication. So, the
order gets returned and Company B loses money. Depending on the
situation, Company B might only lose shipping and packing costs, but
they might also lose significant manufacturing labor and materials costs
and other expenses. They might lose the product entirely (e.g. if it is
In order to prevent such problems, sellers often request purchase orders
from buyers. This document represents the buyer’s intent to purchase
specific quantities of product at specified prices. In the event of
non-payment, the seller can use the PO as a legal document in a court of
law to demonstrate the buyer’s intent and to facilitate collection
efforts. Companies usually request POs when doing business with other
companies for orders of significant size, as the PO reduces the risks
In the course of the accounts payable process, purchase orders are
matched with invoice and packing slips before the invoices are paid.
Types of purchase orders
Many companies (and organizations) now use electronic purchase orders
following specific B2B standards, such as, ANSI, EDIFACT or RosettaNet.
One class of purchase orders is the single-use purchase orders used by
retail stores. The purpose of a single-use purchase order is to keep
track of a single order from a vendor until all items have been received
from that order. Once all items have been received, that purchase order
number can no longer be used.
Another class of purchase orders are the blanket purchase orders. These
are typically used by organizations to keep track of money that was
spent for a particular department or for a specific project (such as IT
equipment upgrade). Another general use of the blanket purchase order is
to limit spending during a specific timeframe or for a specific project.
Accounts receivable is one of a series of accounting transactions
dealing with the billing of customers who owe money to a person, company
or organization for goods and services that have been provided to the
customer. This is typically done in a one person organization by writing
an invoice and mailing or delivering it to each customer. Your Point of
Sale should have a built-in Accounts Receivable module.
On a company's balance sheet, accounts receivable is the amount that
customers owe a business. Sometimes called trade receivables, they are
classified as current assets. To record a journal entry for a sale on
account, one must debit a receivable and credit a revenue account. When
the customer pays off their accounts, one debits cash and credit the
receivable in the journal entry. The ending balance on the trial balance
sheet for accounts receivable is always debit.
Business organizations which have become too large to perform such tasks
by hand (or small ones that could but prefer not to do them by hand)
will generally use accounting software on a computer to perform this
Associated accounting issues include recognizing accounts receivable,
valuing accounts receivable, and disposing of accounts receivable.
Accounts receivable departments use the Sales Ledger
Other types of accounting transactions include accounts payable,
payroll, and trial balance.
Since not all customer debts will be collected, businesses typically
record an allowance for bad debts which is subtracted from total
accounts receivable. When accounts receivable are not paid, some
companies turn them over to collection agencies. However, many debtors
still do not pay; in those cases, some creditors turn to collection