What Do You Need to Know about Purchase Orders?

A 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

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.