Purchase Order Process

Purchase Order Process


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The purchase order process is an integral part of business operations.It's the systematic method companies use to order goods or services from suppliers.While seemingly straightforward, this procedure plays a pivotal role in ensuring financial prudence and operational efficiency.

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When a company identifies the need for a particular product or service, the first step in the purchase order process is generating a purchase requisition. It's an internal document, often used to get approval from higher-ups before an order is placed. Once approved, a purchase order (PO) is created and sent to the supplier. This PO acts as a contractual offer to buy products or services. Upon receiving the PO, the supplier will either accept the order, leading to the next steps in the process, or decline, which may necessitate negotiations or finding a new vendor. If taken, the supplier delivers the goods or services and sends an invoice matching the PO's details. For businesses, this process offers several benefits. First, it allows for better financial tracking. By recording each order, companies can manage budgets more effectively and ensure no unauthorized purchases are made. Second, the process provides legal protection. A PO is legally binding, and any deviation from its terms can be contested. Moreover, the purchase order process also creates an audit trail. This is invaluable for businesses, especially larger ones, where numerous transactions occur daily. Having a record of each step, from requisition to payment, helps trace any discrepancies. In conclusion, while administrative, the purchase order process is a vital business function. It ensures purchasing operations run smoothly, finances are managed wisely, and a transparent record is maintained. Mastering the purchase order process is indispensable for any company aiming for efficiency and accountability in its operations.

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