Purchase order

Once a buyer and a seller have finalized their negotiations in the so called offer phase a legally binding contract is created between them. From such a contract one or multiple pairs of procurement orders and customer orders can be spawned. The procurement order is the business object on the customer side, the customer order is the business object on the vendor side. They are bound together through the b-op network, if both participants have their b-op digitals and they share enough trust.

If there is not an existing contract that governs the relationship between buyer and seller, the purchase order can be used in place of a contract. This offers legal protection for both buyer and seller. Each purchase order is assigned it’s own unique number, known as the purchase order number.

There are various types of purchase orders, the most common are standard purchase orders and blanket purchase orders. Standard purchase orders cover a specific purchase with no recurrence. Blanket purchase orders are used to commit buyers to purchase products or services on an ongoing basis until a certain threshold is reached.

Purchase Contract Basics

All purchase contracts share certain common requirements, and should ideally contain as much detail as possible. That’s because once a purchase contract is formally accepted by a vendor, it becomes a legally binding agreement between the vendor and the purchaser. In general, purchase contracts should contain:

• Detailed and complete vendor information
• A detailed description and quantity of goods or services to be purchased
• Quality specifications
• Full pricing information as agreed upon between buyer and seller side
• Delivery terms and conditions
• Payment terms and conditions

Purchase Contract Varieties

Different types of purchase orders fulfill specific purposes.

Standard Purchase Contract

When you are making a one-time purchase create a standard purchase order. It’s the most common type of purchase order, and the simplest. Basic purchases, like replenishing office supplies, are of this type.

Planned Purchase Contracts

When you are partnering with a single supplier as your sole source of specific goods or services, this type is right. You can create a single contract, and then schedule purchase orders released during the timespan of the contract. This contract type has the benefits, that you and the vendor can plan regarding liquidity demand (you) and stock demand (vendor)

Blanket Purchase Orders

If you find yourself with a need to purchase a specific good or service, but you’re not sure about your precise time frame or quantities required, use a blanket PO. Also known as standing purchase orders, blanket orders have a limited shelf life and cover a specific period of time. They’re useful in locking down pricing terms with a given vendor before making purchases from them. Placing a blanket release against the blanket purchase order will create a binding purchasing agreement, and they can be encumbered as required by the terms of the blanket or standard purchase order.

Contract Purchase Orders

The “contract” in the name of this purchase order is a hint at its true nature. Rather than a binding legal agreement for a specific purchase, contract purchase orders create a high-level, long-term agreement. This legally binding contract spells out in meticulous detail the exact terms, pricing, and conditions of all purchases made from the supplier by your company, but not specific purchases themselves.

These POs have no expiration date, and the framework itself lets you issue standard POs that conform to the terms and conditions established within the contract purchase order. Automation is a boon to this process, as it seamlessly connects financial and legal information and populates fields as required to ensure compliance by both parties for every regular purchase order placed. Encumbrance can be handled more easily as well, since all parties involved will have transparent access to financial and budget data for individual transactions and total spend.

ASPECT	STANDARD	PLANNED	BLANKET	CONTRACT
Established Terms & Conditions	YES	YES	YES	YES
Goods & Services Specified	YES	YES	YES	NO
Pricing Specified	YES	YES	POSSIBLE	NO
Quantities Specified	YES	YES	NO	NO
Account	YES	YES	NO	NO
Established Delivery Schedule	YES	POSSIBLE	NO	NO
Potentially Encumbered	YES	YES	NO	NO
Potentially Encumbered Releases	N/A	YES	YES	N/A

Purchase Orders Power Productivity and Profitability

Rejecting the chaos of rogue spend and unrecorded financial data is the first step out of the wilderness and into the realm of civilized business. Understanding the types of purchase orders available, and putting them to their best use, can help your company spend smarter, reduce waste, and ensure you receive the goods and services you need to thrive, at the prices and terms you expect—and deserve.