PrintA purchase order (P.O.) is a written authorization for a supplier to ship goods or services for a specified price. Larger organizations with established purchasing procedures use them to standardize the request for goods and payment processes. Small businesses can also use preprinted purchase orders to promote standardized and non-negotiable terms. The level of complexity for purchase orders varies but most contain a brief product description, the quantity ordered and the price.
Once a P.O. is submitted, it's much more difficult to negotiate sales terms. Take a P.O. as seriously as you would a contract, and make sure that you cover all these important points in advance:
- Product information. Spell out the agreed-upon exchange of goods or services including color, size, quantity, etc.
- Prices. Is the product priced by the unit or in a lump sum? If you're dealing in a foreign currency, whose exchange rate will apply?
- Payment. Describe the payment terms exactly, including how and when you will be paid. Be sure to calculate the tax and specify who will pay it.
- Delivery. Specify how the goods will be packaged, as well as how and to whom they will be shipped. <
- Defects and warranties. A purchase order can pre-negotiate how you will handle problems of this sort.
- Termination. Spell out what happens if the order is cancelled or can't be filled for some reason.
