A purchase order is the one document that connects what you asked for, what arrived and what you paid. When the three agree, nobody thinks about it. When they disagree, the order is the only place the disagreement can be found.
Businesses that order by email and phone have no such place. They find out an invoice is wrong when the accountant asks, or never. A written process, even a short one, fixes that. Here is one in seven steps.
1. Raise the order
Someone identifies the need: a reorder list, a job that needs parts, a customer order. They raise a purchase order with the supplier, the date, the delivery location, the currency, and one line per product with quantity and price.
The order is a draft. Nothing has been committed. The point of a draft is that it can be reviewed before it is sent.
Control: one order per supplier per need, not one per product. Ten orders to the same supplier on the same day are ten chances for a mistake and ten invoices to match.
2. Approve it
Someone other than the person who raised the order, or the same person if they hold the budget, approves it. Approval is the moment the order becomes a commitment. Until then the supplier should not have it.
Who approves depends on size. In a business of five people, the owner approves everything. At fifty, each department has an approver for its own orders, and large amounts go higher.
Control: if an approved order is changed, it goes back for approval. An order approved at €4,000 and quietly edited to €9,000 is not approved.
3. Send it
The approved order goes to the supplier as a PDF, by email or through their portal, with your order number on it. Ask the supplier to put that number on the delivery note and the invoice. It is the thread that ties the three documents together.
Control: the supplier’s confirmation should match the order. A different price or quantity on the confirmation means the order is edited and approved again, now, not discovered on the invoice.
4. Receive the goods
When the delivery arrives, it is checked against the order, line by line: product, quantity, condition. What arrived is recorded against the order, which raises stock at the delivery location and marks each line as received, partly received or outstanding.
Partial deliveries are normal. The order stays open until the last unit arrives, and each delivery is recorded on its own date.
Control: stock enters the system only from a recorded delivery. A delivery note on a desk is not stock.
5. Record the invoice
The supplier’s invoice is matched against the order and the deliveries. Three things have to agree: the quantity invoiced is not more than the quantity received, the prices are the ones on the order, and the total of all invoices on the order does not exceed the order’s total.
An invoice can arrive before the goods, or long after. Record it against the order when it arrives, with its own date, so that payment terms count from the right day.
Control: mark each line’s price as confirmed once it has been checked against the invoice. Unconfirmed prices are the ones still to verify.
6. Plan the payment
Payment terms belong on the order: 30 days from invoice, 30% on order and 70% at 60 days, whatever was agreed. From the terms and the invoice date, each order produces one or more due dates, and the due dates across all open orders are your payment forecast. A supplier you owe €40,000 next month should not be a surprise next month.
Control: keep firm commitments apart from estimates. An approved order with an invoice has a firm date. A draft has a guess.
7. Pay and close
Payment goes through the bank, and the payment is recorded on the order with its date and amount. When ordered, received, invoiced and paid all agree, the order is complete. Its history stays: who raised it, who approved it, what arrived when, what was paid.
Who does what
The process works best when the steps are held by different people, even in a small team:
| Step | Typically |
|---|---|
| Raise | Buyer, workshop lead, shop manager |
| Approve | Owner, department head |
| Receive | Warehouse |
| Record invoice and pay | Administration or accounts |
One person doing all four is workable in a very small business, as long as the record still exists. Three people doing it without a shared record is how orders get paid twice.
How StockBold runs it
In StockBold every purchase order starts as a draft, is submitted for approval and is approved by someone with that right. You can set approvers per department, and separate who approves any order from who approves only their own. An approved order that is edited returns to draft and needs approving again, and every request, approval and return is recorded with a name and a time. The order is exported as a PDF to send to the supplier.
Deliveries are recorded against the order, in several parts if needed, and raise stock at the order’s ship-to location. Several invoices can be recorded on one order; any that would take the total beyond the order’s is refused. Prices can be marked as confirmed once checked. Payment terms can be split into instalments, and the payment forecast shows what falls due with each supplier month by month, firm dates apart from estimates and approved orders apart from drafts. Orders in a foreign currency keep their currency and rate, while stock and reports stay in yours, and duties, freight and other costs on the order go into the stock value.
Read more about purchase orders in StockBold, or the help guide on creating and approving a purchase order.