Purchase Orders and How They Improve Your Business
Purchase orders are requests that buyers send to sellers that detail the items to be purchased, the quantity of those items, and the price. Acceptance of the purchase order constitutes a binding contract between seller and buyer. Although these documents require an extra step in administration and effort, automation of the process makes it much less time-consuming than it used to be. Here are some reasons why integrating purchase orders into your financial department can be beneficial to your business.
The use of purchase orders adds an extra level of accuracy to your financial information trail. This allows for additional verification of company cash flow statements, income and loss statements, and profit and loss accounts.
Purchase orders provide you with a method of easily checking that your business received what it requested from sellers. Without them, you have to cross-reference information through spreadsheets and other documents to verify that you have indeed obtained the items that you need.
When your company has added the requirement of purchase orders into your financial system, you’ll find it easier to stick to your budget. The process of creating purchase orders causes administrators to first check that your account has sufficient funds to handle the expense. In the long term, the information on purchase orders reveals trends in purchasing behavior that allow you to forecast your needs, plan for the future, and negotiate more effectively with vendors.
Having the additional documentation of purchase orders assists you when you have to verify details during an audit. The increased precision of information makes it much more difficult for employees to commit internal fraud by, for instance, padding the amount required to pay for purchases and then keeping the extra funds.
For more advice on improving your business by implementing purchase orders, get in touch with Flipside Capital.