A Purchase Order is very similar to an invoice within the EBMS software, except that it is not processed and does not contain an invoice number. The Purchase Order window is a good tool for a purchasing agent while keeping track of inventory.
When purchase orders are done on the computer, it is easier to keep track of inventory items. If inventory is utilized, a detailed purchase order should be easily entered at the time of the order by filling in the quantity purchased and the inventory item Id. There are a number of advantages in using a purchase order, such as:
· The quantity ordered is recorded in inventory so that the purchasing agent does not reorder items that have not been received.
· Access to a number of purchasing features.
· Convenient display of the last cost of an item
· Automatic retrieval of an item by vendor part number or inventory.
· Using a purchase order saves time entering the invoice when it is received from the vendor since most of the information is already in the system.
· Assistance in accuracy when placing an order by being able to print the order on hard copy and faxing or giving to the vendor’s salesman.
· It is a systematic way of authorizing a purchase. If the purchasing agent enters the price of the product in the P.O. at the time of the order, this price can easily be verified when the vendor’s invoice arrives. It can also be used to verify the exact quantity that has been ordered.
· Assistance in tracking back orders and delayed shipments.
· A convenient place to record shipping information.
Purchase orders do not become invoices until the invoices are received from the vendor and processed. By entering purchase orders, you will know how many items you have scheduled to come in. This allows you to know if you need to order more to fill orders or meet inventory requirements. By checking Inventory > Inventory Items (select an Inventory Item) > Count tab you will be able to tell how many items you have on hand, ordered from vendors, received from vendors, ordered by customers, and shipped to customers. There are different options you can set in Expenses > Options that will allow for backorders to be placed automatically, the number of items currently on hand, and others. You can gain more information on these items by reading the following sections on purchase orders.
By using the purchase orders, you can have a better control over what expense account purchases are charged to because the person placing the order knows what the item is and what its function is. If you enter the invoices directly, without using purchase orders, the person entering the invoice may not know how the item is used or what it is for, and therefore it may go into an account that is not correct. By using purchase orders, a lot of time can be saved when entering invoices. The detail information is already in the system and all the invoice entry operator will need to do is change the P.O. to an invoice and receive the items to which the invoice relates. Many companies already give detailed information for what they are purchasing to the vendor. Entering POs in the system is not an extra step; it will just be done on the computer rather than by hand.
If you use both purchase orders and sales orders, you will have a very good verification on how many items you currently have in stock, how many are due in, and how many are sold as soon as you have them. Using both purchase orders and sales orders will give you a complete circle of item needs.