Q:

What is the purpose of purchase orders?

A:

Quick Answer

Purchase orders authorize vendors to ship products and document the specified price as well as the terms of the purchase. Purchase orders are legally binding documents and require the agreement of both the buyer and vendor in order to change the terms. Often, purchase orders are open ended, allowing a company to order from a vendor as needed at a set price for a specific time frame.

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Full Answer

Although employees often look at a purchase order as another piece of paperwork to complete, they are essential for tracking expenditures. The accounting department uses these forms in order to determine the funds which the company owes during the designated period. Accounting software offers the option to create purchase orders. In the paperless office, employees complete the purchase order electronically, emailing it to the accounting department.

Purchase orders are not required with every type of purchase. QuickBooks recommends completing a purchase order when ordering items for receipt at a later date but use of other types of entries for purchases made over the counter or shipments for which the bill arrives later. The software manufacturer also recommends documenting items for which one receives the item and the bill together but without an initial purchase order, such as a bill, rather than backtracking and creating a now meaningless purchase order.

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