Purchase Order Process

Overview

Only Authorised staff can create a Purchase Order (think of them as having the ability to sign company cheques) not only that, a PO is a Commercial Legal Binding Document

A PO should always be raised at the time of purchase, the supplier in receipt will then quote the number on their invoice.  Most professional companies will not accept an order without a written PO just like we do not with our clients

To understand the bigger picture please see below a few points why ADXBA and other businesses use a PO system: 

Legally Binding Contract: When a supplier accepts a purchase order, a legally binding contract is formed between the two parties. In addition, the buyer (ie us Adxba) should always clearly and explicitly communicate their requests to the seller so there is no confusion when the purchase order is received, i.e. delivery address, terms, agreed price, produce and quantities etc.

Cost Incurred/Cash Forecast: When a PO is created and issued it gives Finance visibility of what costs the business have incurred, Finance then know what invoices too expect for payments in the near future which also impacts on cash flow forecasting

WIP: Purchase orders are used to create monthly financial journals called “Working Progress” they allow Finance to identify what cost are still outstanding against job’s which have been completed, eg adjust for the correct profit and likewise for incomplete jobs Finance can then defer any costs incurred where the revenue has not be recognised

Matching: Invoice values are matched against purchase orders to eliminate any over charges  

Authorised Purchasers:  It eliminates any unauthorised purchases.  On the flip-side we would NOT accept a Clients order without a written PO because the person instructing us to do the work may not be authorised to do so, ADXBA could do the work and never get paid

Job Costing: All costs are logged against the correct jobs and project managers know what kit has been ordered

Audit Trails: Can be tracked both internally and externally