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How do purchase orders work?

shilala

shilala

Lifer
I've used PO numbers in the past for purchasing (through work). Whenever I needed to buy tools or material, I simply called the secretary and she gave me a number.
We operate a small business and have been asked on a number of occasions if we'd accept a PO.
WTF/Chuck?
What am I to do with the number? Am I expected to ship the item and bill the customer?
I'm clueless.
Yes, I've googled it to death, but have not found anything more than touches on the subject.
 
A Purchase Order is a document that states what someone wants to buy and the terms and conditions which apply.

If someone wants you to accept a PO, it means that they want you to deliver now, then bill them for whatever they bought. Essentially, you're extending credit to the company who issued you the PO.
 
Yup. We use them in my lab--basically we send a company a PO, they ship the product to us, and then they get money from the University. It works well if you're shipping to a large number of locations, and you want to keep accounting centralized.
 
So there is no expressed or implied "promise" in a purchase order?
It's no sort of legal note that ensures payment?
I guess the sense I got was that there was some sort of inherent safety in accepting a PO.
 
Yes, it says they will pay you, and they are legally obligated to do so. But it's no different from any other form of credit - you're relying on their promise to pay.

The safety of accepting a PO is based on the safety of the company who issued it. If a two-bit operation issues you a PO and can't afford to pay, they still owe you the money but you might have trouble collecting. No different from a credit card, really.
 
It's basically just credit between two companies.

Usually it is because one person is in charge of making sure the equipment is in order but someone else is responsible for all of the bills... It makes it easier to just be billed.
 
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