Understanding Orders
What Does This Page Cover?
Learn about what is Purchase Orders (POs), their importance in procurement, and how vendors and the procurement team processes and fulfill the order.
Overview
Orders refer to the formal procurement requests issued by a buyer to a vendor to purchase the intended goods. These orders are a crucial part of the procurement process and help facilitate the efficient acquisition of necessary items for a business or organization.
Purchase Order (PO) in Procurement
A purchase order (PO) is a legally binding document issued by the buyer to the supplier. It outlines the details of the purchase, including the quantity, description of goods or services, agreed-upon price, delivery date, terms of payment, and any other relevant terms and conditions. A standard practice in procurement involves first generating a procurement request before moving on to the creation of a PO.
Each purchase order is given a unique identification number for tracking and reference, contains vendor Information (such as name, address, and contact details), buyer information, item details, delivery instructions, authorized signatures, and any other relevant information.
The creation of POs falls under the purview of the procurement team; however, these orders are usually addressed to the vendors. Consequently, they are responsible for fulfilling it by delivering the specified goods within the agreed-upon timeframe and meeting the quality standards outlined in the PO.
POs for Procurement team
Once a PO is created, it goes to the procurement team as 'open orders' to be processed further.
The team can further track the dispatched, re-dispatched orders with Goods Received Note (GRN) and the completed orders separately with Zoho Creator Procurement.
POs for Vendors
Vendors are responsible for processing POs issued by buyers. Their first task is to receive and review the PO and further work towards fulfilling the orders with the shipping and delivery of the required goods. They can further process and manage the orders from here including dispatching and re-dispatching of orders.
Use Case
Inventory Management: In cases of goods procurement, POs are used to update inventory records. When goods are received, they are reconciled with the information on the PO to maintain accurate inventory levels.
In general, POs used for the procurement of goods would include:
- Buyer and seller contact information
- PO number and date
- Description of the items or services being purchased, including quantity, unit price, and total price
- Payment terms and delivery instructions
- Terms and conditions of the purchase
In the below snippet, you can see the project and vendor information is listed and the corresponding PO document carries the details of it.
Points to Note
- At the moment, only the procurement team is allowed to capture GRN. However we are working on introducing a feature that will allow other roles to update GRN in the future. For example, the store team or the house keeping team.
- Once an order is fulfilled, the payment can be done offline and the transaction details are to be updated in the app manually. However, we are in the midst of developing an automated payment process.
- We are also actively working on introducing an AI feature called OCR (Optical Character Recognition) that will automatically extract details from invoice for three-way record keeping from PO Document, Invoice, and GRN document.
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