Purchase Order (PO) template

What is a purchase order?

A purchase order (PO) is a commercial contract created by a buyer, which outlines the specifics of products or services they wish to purchase from a seller.

It includes vital details such as types, quantities, and agreed prices for the items in question.

How does a purchase order work?

A purchase order (PO) is an official document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services. Once the seller accepts the PO, it forms a legally binding contract between both parties.

The process begins when the buyer sends a PO detailing their order. The seller then validates it. Upon agreement, they fulfil the order. After the delivery, the buyer pays based on the PO, invoice, and any agreed-upon payment terms.

Who is responsible for managing purchase orders?

In most businesses, the purchasing or procurement department manages purchase orders.

They are responsible for creating, issuing, and tracking purchase orders, but they also work closely with finance departments to reconcile POs with invoices and payments to ensure accurate financial records.

What is the purpose of a purchase order?

A purchase order serves several key purposes in a business context:

• Communication: It allows the buyer to precisely communicate their requirements to the seller, including quantities, price, delivery date, and payment terms.

• Record-keeping: It offers a systematic way for a company to document each transaction, which helps with inventory management and financial record-keeping.

• Legal protection: Because it's legally binding, a PO ensures the buyer receives the exact goods or services ordered, while the seller secures payment upon fulfillment.

What are the elements of a purchase order template?

An effective purchase order template includes the following elements:

• ‍PO number: This is a unique reference number assigned to each purchase order for easy tracking and future reference. It facilitates quick retrieval and verification of transaction details.‍

• Issue date: The date on which the purchase order is issued is crucial as it can impact delivery schedules and payment terms.‍

• Buyer's information: This includes the buyer's full name, company name, billing address, delivery address, and contact details. It helps ensure proper delivery and billing.‍

• Seller's information: Similar to buyer's information, this includes the seller's full name, company name, and contact details. It's vital for communication and invoicing.‍

• Description of goods or services: This part should clearly detail the goods or services being purchased, including product or service names, SKU numbers (if applicable), and any specific model or part numbers.‍

• Quantities: This specifies the amount of each item being ordered. It aids the seller in preparing the order and allows the buyer to verify that they received what they requested.‍

• Price: This is the agreed-upon price per unit of each item. It is critical for both the invoice the seller prepares and the payment the buyer makes.‍

• Total cost: This is the overall cost of the order, generally calculated by multiplying the price per unit by the quantity for each item and adding up these amounts.‍

• Delivery date: The expected date by which the buyer wants to receive the order. It's important for managing inventory and scheduling.

• ‍Payment terms: These are the agreed-upon terms for payment, such as due dates for payment, any early payment discounts, and the methods of payment accepted.‍

• Additional terms or instructions: This could include information on returns, warranty, maintenance, or any other special instructions related to the order.

Each of these elements plays a key role in ensuring clarity and precision in the purchase process, minimizing the potential for disputes or misunderstandings.

What is the traditional workflow for managing purchase orders?

Traditional purchase order management tends to be a time-consuming, tedious process. The following stages illustrate this conventional approach:

1. Drafting‍

The first step involves drafting the purchase order. Buyers identify their need for specific goods or services and draft a detailed purchase order.

Typically, this task is completed manually, using a pre-formatted template, and involves inputting the buyer's and seller's details, item descriptions, quantities, prices, delivery date, and payment terms. However, the manual nature of this process increases the potential for errors.

2. Negotiation‍

The drafted purchase order is then sent to the seller for review and negotiation. The seller reviews the PO and might engage in negotiations over certain aspects like price, delivery timelines, or payment terms.

Any changes necessitate updating and redrafting the PO, which is usually done in Word before the contract is shared again via email. This adds more time to the process and introduces scope for potential errors with each revision and new version.

3. Signing‍

Upon agreement of terms, the seller accepts the purchase order, effectively signing the contract. This acceptance can be communicated through various methods like email, fax, or physical mail, which can also delay the process and complicate record-keeping.

4. Storing‍

Storing the signed purchase order is a critical step for record-keeping and future reference. Traditional methods often involve filing hard copies or saving digital copies in various systems or databases. This can lead to challenges in retrieving and referencing the documents later, though.

5. Tracking‍

The final stage in the traditional workflow is tracking the purchase order throughout its lifecycle. This includes monitoring delivery of goods or services, verifying received items against the PO, reconciling invoices with the PO, and tracking payment.

In a traditional setup, this could require manual cross-checking between several documents and systems, resulting in a time-consuming and error-prone process.

Fortunately, using a purchase order template to automate your POs in Juro can eliminate this friction and admin. We'll explain how now.

How can using a purchase order template help?

Using a robust purchase order template can streamline and simplify the contracting process, resulting in several significant benefits:

• ‍Standardization: Templates offer a standard format for all purchase orders. This reduces ambiguity, enhances communication, and ensures all necessary details are captured consistently.‍

• Efficiency: With a template, there's no need to create each purchase order from scratch, saving valuable time and effort. If you use your template in Juro, you can automate purchase orders in seconds. ‍

• Accuracy: Pre-defined sections in a template minimize the risk of missing information or mistakes, improving the accuracy of the document. They also reduce the scope for edits that haven't been approved by legal.

‍‍How to automate purchase orders in Juro

If you're looking to streamline the contract management process further, you can use Juro to automate your purchase orders.

Juro's automated contract templates allow businesses to generate purchase orders in seconds. Data is pulled into the contract template automatically either from a simple Q&A workflow or an integration with another business system where the order information is captured.

This means that procurement and finance teams can have purchase orders in seconds, rather than waiting for legal to draft them.

But that's not all. Juro can also streamline the rest of the contract lifecycle using the following features:

• Conditional logic. Instead of generating one-size-fits-all purchase orders, Juro users can  insert rules and conditions into their purchase order templates. This will allow automate the addition, removal or editing of clauses depending on the values in the contract and the workflows defined by legal teams when creating the template.

• Browser-based negotiation. Purchase orders are often subject to negotiation, which can be a drawn-out process. But Juro’s browser-native contract negotiation features enable suppliers to add questions and comments directly onto the purchase order. These can then be reviewed and replied to in real time.

• Bulk actions. Juro’s bulk actions allow procurement teams to produce, auto-fill, and dispatch purchase orders for approval en masse - an ideal solution for fast growing businesses.

• Mobile-responsive eSignature. Suppliers can promptly sign purchase orders as soon as they’ve read and received them using Juro’s native eSignature functionality. No more switching between tools!

• Secure contract storage. Juro's data-rich, secure contract repository means that all purchase orders are stored safely in one place for future reference.

• Advanced contract tracking. Juro users have full visibility into their contracts, with OCR-enabled search functionality, custom dashboards, automated contract reminders and more.

To find out more about how Juro can be used to automate purchase orders (and other contracts) for your business, hit the button below to book a personalized demo.