All You Need to Know About Purchase Orders

Purchase orders, when used appropriately, can assist you in running a more dynamic rental property business while also saving time and money. This makes them significantly useful in real estate finance.

The fundamental aspects of a purchase order are covered in this article.

What is a Purchase Order?

A purchase order is a document issued by a buyer when placing an order or buying from its supplier or vendor. Typically, a purchase order would contain the following information:

• The type of goods
• The quality of the goods
• The price of the goods

Basically, it is a written or electronic offer to purchase certain goods in a specific quantity and at a specific price. The buyer and seller enter into a contract when a purchase order is accepted. There are several templates of purchase orders depending on the type of transactions you are carrying out.

Purchase orders are different from invoices in that they are drafted by the buyer, whereas invoices are produced by the seller.

An effective purchase order system helps a real estate accountant keep a stellar real estate bookkeeping record and meet up with quality and auditing requirements.

Benefits of Purchase Orders

The value of a well-functioning purchase order system for your rental property cannot be over-emphasized.

A good purchase order system not only saves you money and time but also ensures that you, as a landlord or property manager, can keep track of the information your clients give you throughout your dealings.

Additional reasons for incorporating an excellent purchase order system into your real estate business include:

Proper Documentation

In the event of a dispute, an effective purchase order system enables you, as a landlord or property manager, to have a proper record of what you requested.

This guarantees that when mix-ups occur, you have evidence to back the fact that it didn’t come from your end.

Proper Management of Projects

A functional purchase order system can assist you in estimating costs before the start of a rental property upgrade and maintenance project.

By establishing cost estimates before commencement, you can properly manage your rental property budget.

Similarly, it also ensures that all items you requested are delivered as and when its due, and you can prepare for said delivery.

Balanced Accounts

Auditing of financial accounts usually involves detailing every income and expenditure information. Keeping a record of purchase orders helps you verify and crosscheck the various expenses you incurred.

This way, your accounts would be balanced.

Improvement of Real Estate Bookkeeping

With an effective purchase order system, you can improve your rental property’s financial and inventory accuracy.

You can bid goodbye to marginal errors caused by verbal orders.

Purchase Orders are Legally Binding Documents

Once a purchase order is accepted by a seller or vendor, the vendor or seller is legally bound by the purchase order.

Therefore, the seller or vendor cannot renege on the terms of the purchase order. Buyers and sellers are held legally liable to the terms of the purchase order.

Types of Purchase Orders

There are four different types of Purchase Orders, each with its own set of information that separates it from the others. They include:

Standard Purchase Orders

The most well-known and widely used type of purchase order is the standard purchase order. This type simply includes the most basic and straightforward information.

For instance, it could detail the products or services being purchased, as well as the quantity and payment information.

Planned Purchase Orders

This sort of Purchase Order is used to make a request for future products or services.

This sort is ideal for landlords or property managers that require the manufacture of significant quantities of items in advance.

Blanket Purchase Orders

Blanket purchase orders are the sort of purchase orders that assure a vendor that a buyer will purchase a certain number of products or services.

The customer receives a lower price from the vendor or seller as a result of this.

Contract Purchase Orders

When you need the most secure legal support from a purchase order, a contract buy order is the way to go.

Contract purchase orders are mainly used when dealing with large or expensive products and services for the best legal protection.

How to Complete a Purchase Order

Below is a step-by-step procedure on how to complete a purchase order:

• Identify the products or services you want to purchase from the seller. Mostly, you need to include in a purchase requisition form the products or services you want and the quantity

• Determine when you will need these products or services delivered to your office

• Create a draft of your purchase order. It is important that you include both the price per item and the total price based upon the number of each item that you would purchase

• The fourth step is the submission step. You must proceed to submit your purchase order to the seller

• Next, wait for confirmation from the seller as regards the purchase order you submitted. If it is taking too long, reach out to the seller for confirmation

• If you receive positive confirmation from the seller, then the seller will send you an invoice. This invoice would detail a payment timeline and the total cost of your order

• Receive delivery of goods and services as ordered.

• The final step would be comparing the Purchase order with Goods receipt, and invoice from the seller, analyze and resolve discrepancies.