What is a Purchase Order?
A Purchase Order is a commercial document created by the buyer and issued to the seller. A purchase order contains information such as prices, quantities, payment terms and delivery date. It shows buyer’s formal intent to buy seller’s goods at the price and quantities mentioned in the purchase order. The buyer might request the seller to physically or digitally sign the purchase order in order to indicate acceptance of the terms.
When is a Purchase Order issued?
A purchase order, in international trade, is issued in import shipments by the buyer to the seller.
Why is a Purchase Order important?
- Purchase orders provide clear details on product codes, descriptions, quantities, prices, shipping and payment terms. This helps in reducing any errors in procurement or manufacturing by the seller.
- It helps finance teams in creating and tracking payable
- Serial numbers on purchase orders help logistics teams in managing, tracking and communicating with sellers effectively. Purchase orders ensures logistics teams stay organized and are aware of which goods on which purchase orders are being delivered when.
What’s included on a Purchase Order document?
Buyer: Name and address of the buyer
Seller: Name and address of the seller
Order Date: Date PO was issued
Purchase Order Number: Serial number of the PO
Delivery Date: Agreed upon delivery date from the seller
Method of Shipping: This could be SEA, AIR, TRUCK or RAIL
Type of Shipment: FCL (Full Container Load), LCL (Less Than a Container Load), FTL (Full Truck Load), LTL (Less than a truck load), Air, Break Bulk
Country of Origin: Country where the goods were manufactured
Country of Destination: Country where goods will be finally delivered (Usually the country where the buyer resides)
Port of Loading and Port of Discharge: Seaport or airport in respective loading and discharge locations
Incoterms: Could vary from EXW, FOB, CFR, DDP, DAP. Checkout our detailed guide on incoterms.
Product details: Product descriptions, SKU numbers, quantity, price
Bank Details: Account information including account number and sort codes to the account you would like the buyer to pay to
Additional charges and discounts: Charges could include value added services, freight or discounts your sellers are offering
Name and signature of authorized signatories