What are the Best Tips for Purchase Order Tracking?

Marsha A. Tisdale

It would be difficult to maintain control over inventory as well as product costs without a good purchase order tracking system. Purchase orders may be mailed, faxed, e-mailed, or simply called in to the vendor. There are electronic purchase orders, usually between businesses, as well as the single-use form, such as those used in retail stores. Some businesses use a blanket purchase order to track purchases made for certain categories of products. A purchase order tracking system, regardless of its format, should be designed to give a company the most information to make good purchasing decisions.

An automated system may be used to track inventory and produce purchase orders automatically when necessary.
An automated system may be used to track inventory and produce purchase orders automatically when necessary.

A purchase order is a commercial document that a purchasing company sends to a selling company that indicates the products, quantities, and price. It is an agreement and a legal offer to buy products and/or services. Purchase order tracking is important for the internal control of a company.

Purchase orders may be mailed, faxed, e-mailed, or simply called in to the vendor.
Purchase orders may be mailed, faxed, e-mailed, or simply called in to the vendor.

The purchase order form should show the order date and date required, the shipping method, and the vendor name and address. It must also contain the product ordered, the cost for each item, and the total price. Sales tax should also be included if applicable. Electronic generation of purchase order forms in some companies may also be tied to inventory to maintain a balance of product on hand.

In some companies, electronic generation of purchase order forms may be tied to inventory.
In some companies, electronic generation of purchase order forms may be tied to inventory.

First the company must know what has been ordered. Lack of this information may cause the company to end up with too little inventory and not be able to meet the demand of its customers or too much inventory, which wastes space and decreases cash flow. A good purchase order tracking system will allow a company to view instantly what has been ordered and track the status of the orders.

Purchase order tracking is important for the internal control of a company.
Purchase order tracking is important for the internal control of a company.

A company that uses a purchase order tracking system also cuts down on the possibility of employee fraud. For example, it is important to have a pre-assigned number to each purchase order. This averts the possibility of an employee ordering goods from a vendor and using the products for personal benefit.

Many businesses use purchase order numbers to keep track of their own purchases.
Many businesses use purchase order numbers to keep track of their own purchases.

Often a company will use an automated system for creating and tracking purchase orders. In this way, the company can maintain a product catalog that can be sorted by vendor, product, and price. Additionally, the system will produce a database to store a list of inventory and constantly update that list. Software is available that will create the purchase order form, keep track of outstanding and completed purchase orders, and even analyze purchasing trends to assist in price negotiations with vendors.

A purchase order tracking system centralizes purchasing, which avoids duplication. An electronic system will also provide a vendor database and allow purchase orders to be e-mailed to eliminate excess paperwork. Purchase order management allows the company to control its purchases and limit the possibility of theft.

Procurement officers may reconcile purchase orders and invoices with packing slips before accepting a delivery.
Procurement officers may reconcile purchase orders and invoices with packing slips before accepting a delivery.

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