Purchase Order Creation
Basic Information Needed to
Optimize Total Value
Purchasing Order Creation is a Fundamental Purcha...
Summary
• Purchase orders are used by organizations to
buy goods and services.
• The exact format and means of transmissio...
Purchase Order - What is it?
• A purchase order is a contract between the Buyer and Seller.
– Sometimes there is confusion...
Main Elements
There is no exact best format for a PO and method of
transmission can vary but there are basic elements
pres...
General / Header Information
• Organization Name
• Purchase Order Number
• Buyer Name
• Buyers Contact Information
• Billi...
Internal Information
Data which has internal use for audit purpose, integration
with AP, and data analysis. In some cases ...
Description of Requirements
• Description
• Quantity
• Price
• Reference to applicable specifications
• Quality Requiremen...
Approval
• Name and Title of Buyer with Authorization to
place order on behalf of company
• Signature (actual, electronic,...
Terms and Conditions
• Boiler plate standard PO terms
• Other unique terms as applicable
• Payment Terms
• Method of payme...
Logistics
• Ship to Address
• Shipping terms
• Shipping Method
• Packaging Requirements
• Reporting needs/Updates
Bill Koh...
Summary
• Format and way to send purchase orders are less
important than including key information in the PO
creation proc...
Next Steps
• Identify Specific Key Items for your Organization
• Focus on those items diligently and discard the rest
• Es...
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Purchase Order Creation - Basic Information Needed to Optimize Total Value

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Creation of Purchase orders is a fundamental skill of an organizations Purchasing group. There is no exact best format for a PO and method of transmission can vary but there are basic elements present in all Purchase Orders. Including key items will: optimize value of items ordered, minimizing transaction cost, reduce compliance risk and enable cost savings through spend analytics.

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Purchase Order Creation - Basic Information Needed to Optimize Total Value

  1. 1. Purchase Order Creation Basic Information Needed to Optimize Total Value Purchasing Order Creation is a Fundamental Purchasing Skill Creation of Purchase orders is a fundamental skill of the Purchasing group. There is no exact best format for a PO and method of transmission can vary but there are 30 to 40 basic elements needed to create Purchase Orders. Including these key items will: optimize value of items ordered, minimize transaction cost, reduce compliance risk and enable cost savings through spend analytics. Bill Kohnen Purchasing Fundamental Discussion July 2014
  2. 2. Summary • Purchase orders are used by organizations to buy goods and services. • The exact format and means of transmission are less important than the basic information needed to maximize value. • Value relates to the actual good/service as well as the efficiency of the transaction, compliance with policy and ability to leverage knowledge gained from the transaction in the future Bill Kohnen Purchasing Fundamental Discussion July 2014
  3. 3. Purchase Order - What is it? • A purchase order is a contract between the Buyer and Seller. – Sometimes there is confusion whether a PO is a contract but it is. If there is a separate master agreement, service agreement, Statement of work, proposal etc. that can be incorporated into the PO by specific reference. • It gives the Seller reasonable assurance that the request from the Buyer is legitimate • Used effectively it clearly describes what is needed by the Buyer • It contains all information for Buyer and Seller to conduct the transaction from fulfillment to payment • A purchase order provides a level of control, documentation, and data history that can be used for audit and business analysis. Bill Kohnen Purchasing Fundamental Discussion July 2014
  4. 4. Main Elements There is no exact best format for a PO and method of transmission can vary but there are basic elements present in all Purchase Orders 1. General Information /Header Information 2. Internal Reference Information – Not necessarily displayed on PO Document but part of PO creation 3. Description of requirement(s) 4. Approval 5. Terms and Conditions 6. Logistics information Bill Kohnen Purchasing Fundamental Discussion July 2014
  5. 5. General / Header Information • Organization Name • Purchase Order Number • Buyer Name • Buyers Contact Information • Billing Address • Supplier Name • Supplier Address • Supplier Contact Bill Kohnen Purchasing Fundamental Discussion July 2014
  6. 6. Internal Information Data which has internal use for audit purpose, integration with AP, and data analysis. In some cases maybe displayed on PO • Cost Center • Account Number • Commodity/Category Description • Purchase request number • Type of Spend: Capital, Expense, Operations, Project etc. • Requestor • Requestor Department • Requestor Contact Information Bill Kohnen Purchasing Fundamental Discussion July 2014
  7. 7. Description of Requirements • Description • Quantity • Price • Reference to applicable specifications • Quality Requirements as Applicable • Unit Price • Total Price • Tax Rate as applicable • Reference to proposal and/or quotation • Product Certifications/Test Results as Needed Bill Kohnen Purchasing Fundamental Discussion July 2014
  8. 8. Approval • Name and Title of Buyer with Authorization to place order on behalf of company • Signature (actual, electronic, or by other established practice) • Acceptance requirements for payments (as applicable) Bill Kohnen Purchasing Fundamental Discussion July 2014
  9. 9. Terms and Conditions • Boiler plate standard PO terms • Other unique terms as applicable • Payment Terms • Method of payment Bill Kohnen Purchasing Fundamental Discussion July 2014
  10. 10. Logistics • Ship to Address • Shipping terms • Shipping Method • Packaging Requirements • Reporting needs/Updates Bill Kohnen Purchasing Fundamental Discussion July 2014
  11. 11. Summary • Format and way to send purchase orders are less important than including key information in the PO creation process. • List of key items is not meant to be 100% definitive for all industry but to identify core items applicable to most purchase orders • Including key elements will result in optimizing value of the goods/service with less operational friction while meeting compliance needs and enabling further savings from spend analytics Bill Kohnen Purchasing Fundamental Discussion July 2014
  12. 12. Next Steps • Identify Specific Key Items for your Organization • Focus on those items diligently and discard the rest • Establish policy and process around PO creation • Optimize and Leverage technology to support process This might mean putting in place a relatively low cost cloud based software as a service solution for an organization using a manual process or an organization using a legacy enterprise ERP system. Bill Kohnen Purchasing Fundamental Discussion July 2014

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