Small Business: Preparing the Purchase Order

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Preparing the Purchase Order

The purchase order specifies an agreement between the seller and the buyer.

The objective of a purchase order is to communicate within your own firm and communicate to the supplier the quantity, quality, and type of materials or services being ordered, as well as the prices agreed upon, the method of packaging and shipment, credit terms, and any conditions or specifications which must be met.

A purchase order should contain at least the following information where it applies:

buyer's name, address and signature
supplier's name and address
date
shipping address
shipping instructions
customer identification number
model number
verbal description of item(s) being purchased
quality specifications
quantity
dates required
packaging instructions
unit price discount
net amount
terms of payment when extended
standard conditions such as maximum overshipments which will be accepted, liability during transit, method of dispute settlement, Underwriter Laboratories and other safety standards, etc.

In addition, many firms print a series of standard terms and conditions on the back of each purchase order. These are, of course, different for different firms. Their purpose is to provide a measure of legal protection in the event of disputes with the seller on matters concerning some or all of the following:

Definitions

Price

Delivery provisions

Warranty and specifications of the materials

Packing

Title

Insurance

Patent infringement

Labor

Taxes

Compliance with law

Subcontracting or assignment

Modifications of terms and conditions

Contract termination

Invoicing and payment procedures, including discounts if they apply

Legal effect and proceedings

Motivating Suppliers to Meet Their Obligations

In general, manufacturers who want to motivate their suppliers to give them outstanding service and who expect to have reliable vendors must, of course, follow the golden rule and treat good vendors the same way as they want to be treated by their customers. This means that, as buyer, you should not:

regularly request quotations from a vendor who rarely, if ever, receives an order.
always push the vendor for the lowest price available anywhere
constantly expect the vendor to accept emergency conditions which often are the result of poor planning
blame the vendor for mistakes which could have occurred in your own shop
always force the vendors to do rework or repairs on quality problems when the quality problem is not serious
strictly insist on tight delivery dates with all purchases
delay in placing orders and then ask that they be given great urgency, etc.

Good relations require an understanding of the vendor's needs and willingness to solve problems in a constructive, positive way.

The purchase order should be a multiple copy form so that the purchase may be effectively communicated to all relevant personnel within your firm. Typically, copies of the purchase order are distributed to purchasing files, and to warehouse or receiving personnel who must check the shipment against the purchase order.

In addition, scheduling/inventory control and possibly quality control people may receive copies.

Food For Thought
Whatever you dwell upon, grows. The more emotionally and intensely you think about it and concentrate on it, the more it grows and expands. What do you think about?
Do you constantly think about your problems? Then they will increase. Instead, dwell upon your goals. You can only hold one thought in your mind at a time. So get in the habit of substituting positive thoughts for negative ones.

That is why goals are so important. They give you something positive to focus on. When you continually think about your goals, there's simply no room left for negative thoughts.

You subconscious mind is a powerful resource that can work for you or against you. The subconscious mind makes no judgments -- it simply carries out the orders sent to it by the concious mind. When you focus on the positive things that you want to achieve, when you repeatedly visualize them in detail, you are sending commands to your subconcious mind. Once you've given it a clear direction, your subconcious will find a way to bring your goals into reality.

Constantly think positive thoughts.

Fast food. Instant coffee. Overnight delivery. Microwave ovens. Faxes. Email. Everywhere you look there is technology for instant gratification. We've come to expect immediate results. There's certainly nothing wrong with having a sense of urgency -- that's the way we get things done. However, some of the best things in life simply take time.
The more you invest in the future, the better it will be. Sure, you want to put plenty of energy into living for today. But today turns all too soon into yesterday. And when you suddenly find yourself in what used to be the future, it helps when you've sent some energy ahead.

Investing in the future will make time your friend, and give you a reason to look forward to each new day.

Do something that will bring you instant gratification, and it's gone at the end of the day. Do something today that won't benefit you for six months, and suddenly your future is brighter. The farther into the future you plan and work, the greater your influence will be when your effort comes to fruition.

Make a habit of planting seeds each day, and the future will bring a bountiful harvest.

What? That seems like a contradiction. It's not.
Do the hard work first. Go ahead and get it out of the way in the beginning. When you do that, it makes everything that comes after it much easier. For one thing, if you do the hard work first, you don't have it "hanging over your head" all the time. You don't have to spend time and effort worrying about it because it's already done!

Even more importantly, doing the hard work first almost always gives you a solid foundation and preparation that makes everything else flow much more smoothly. When you work hard now, you'll work less later. And you'll be more effective, too.

Generally, the hardest part of any project is also the most critical. When you do the hard part first, you're less likely to run into a time crunch at the end. After all, when the critical part is already done, the other stuff can slip if it has to.

You're going to have to do the hard part sooner or later. So you might as well do it sooner, get it over with, and start reaping the benefits from it right away.