What is the PO | Meaning | Types | PO and Non PO Invoices
PO stands for Purchase Order. It is a commercial document issued by a buyer to a seller, indicating the types, quantities, and agreed prices for products or services the buyer wishes to purchase. The purchase order serves as a legally binding contract between the buyer and the seller once the seller accepts it. It outlines the terms and conditions of the purchase and serves as a record for both parties.
Types of Purchase Orders:
Each type of purchase order serves a specific purpose and helps streamline the purchasing process, ensuring that goods and services are acquired efficiently and within the agreed-upon terms.
PO and Non PO Based Invoices
PO (Purchase Order) and Non-PO (Non-Purchase Order) invoices are two different types of invoices used in the procurement and payment processes of a business. Let's explore each type:
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After the supplier delivers the goods or completes the services, they issue an invoice known as a PO invoice. This invoice references the specific purchase order number, indicating that the goods or services provided are in line with the agreed terms. The buyer then matches the PO invoice with the original purchase order and the receipt of the goods or services to ensure accuracy. Once everything matches, the buyer processes the payment for the invoice.
Using PO invoices helps ensure that purchases are made according to established agreements, reducing the risk of errors and discrepancies in the payment process. It also enables better tracking and control over the procurement process.
For example, in some cases, a company may need to purchase office supplies from a local vendor on short notice. Instead of going through the lengthy process of creating a purchase order, the company directly requests the goods from the vendor. The vendor then issues a non-PO invoice, which includes the details of the transaction (items, quantities, prices, etc.).
Non-PO invoices may also be used for recurring expenses, utility bills, and other services where the amount or timing of the expense cannot be predicted in advance.
While non-PO invoices offer more flexibility and speed in processing smaller transactions, they may be more challenging to track and control compared to PO invoices. Consequently, companies often implement specific guidelines and approval processes for handling non-PO invoices to ensure proper documentation and payment processing.
In summary, PO invoices are associated with purchase orders and are used for more structured and controlled procurement, while non-PO invoices are used for ad-hoc or one-time purchases and provide greater flexibility but may require additional oversight to manage effectively.