Also known as a PO, a purchase order is a commercial legal document and first official offer given to a seller by a buyer. This written authorization will indicate the types, quantity and agreed upon prices for various products or services. Acceptance of this PO by a seller creates a written contract between both the seller and the buyer. This means that no contract exists until the purchase order itself is accepted and the items or services requested are supplied to the buyer. This is used in order to control the purchasing of various products and services. Many purchase orders are not paper-based and transmitted electronically. It is common for these POs to be used in order to buy services or goods online too.
Reasons for Using a Purchase Order Form
There are many reasons why a purchase order form may be used. For instance, purchase orders allow buyers to clearly communicate their intentions in specifics to sellers. Also, with this type of legal document, sellers are protected if a buyer refuses to pay for the goods or services they agreed to purchase. Purchase orders also help a purchasing agent to track incoming orders and pending orders efficiently.
In terms of financial institutions or commercial lenders, they may provide financial assistance on the basis of purchase orders alone. This offers business people to get loans against purchase orders before they are paid.