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Why Purchase Orders are Important to SMBs

Are you running a small / mid-sized company but not using purchase orders? It may be more important than you think.

When most small businesses start out, they forego purchase orders in favor of handshakes and informal processes. An unspoken agreement between a small-time supplier and a trusted vendor.

But what happens if there’s ever a dispute, a disagreement about a payment, quality standards or even performance. You need a document to reference.

As business grows in size and complexity, a formalized system ensures your purchases are ordered, budgeted for and fulfilled accordingly. That’s where purchase orders come in.

Purchase orders are an important tool that businesses like yours should use to ensure spend stays within budget. Without purchase orders tracking expenses is more difficult, prone to errors and validating delivery reports becomes a nightmare.

7 important elements of a PO

1. Name of the company making the goods or service

  • Ensures both parties know exactly who is involved in every purchase.

2. Purchase Order number

  • A unique reference that enables matching of purchases with what is being ordered and what will be delivered. The purchase order number makes it easier to see which purchases were made, which were paid, and which items delivered by which date with the corresponding number.
  • A PO number ensures that your invoice gets processed quickly and it minimizes the risk of incorrect payments.

3. Purchase Order Date

  • An official record as to when an order was placed and when it was delivered.

4. Delivery & Invoice Addresses

  • Ensures all correspondence and deliveries are sent to the right place, to ensure no late deliveries or payments.

5. Description and quantity of the goods or services

  • Ensures no doubling up or incorrect purchases were made.
  • Includes technical specs.

6. Agreed Prices

  • Leaves no wiggle room for price increases without your knowledge. Having price(s) listed on your PO also allows you to track pricing history with vendors, and see if it’s necessary to re-negotiate or shop around for a new deal.
  • Include taxes and total price

7. Payment Information

  • Lets purchasers know where exactly purchases should be made to prevent any delays in the process.


Other important reasons why Purchase Orders are important

  • They make orders easier to track;
  • They ensure clear communication;
  • They make life easier for your vendors;
  • They help you avoid audit problems;
  • A Purchase Order provides a contractual, legal protection for the buyer and the supplier. They protect both buyers and suppliers.

Purchase orders ensure spend stays within budget. Without purchase orders tracking expenses is more difficult, prone to errors and validating delivery reports becomes a nightmare.

You might say, “Isn’t a purchase order the same thing as an invoice?” Actually, no.

How purchase orders (POs) are different from invoices

A purchase order is created by a buyer, who wants to make sure they received exactly what they ordered. Meanwhile, an invoice is issued by a vendor or supplier who requests payment.

An invoice is a statement of money owed, the due date, and any available discounts (i.e. early payment).

Most small and midsize businesses and enterprises we know still use spreadsheets to manage purchase orders.

But did you know… ? All large businesses use a purchase order system.

Using manual processes with purchase orders puts your company finances at risk because you can’t:

  • Monitor your expenses accurately and timely
  • Prevent money-losing mistakes
  • Stay within your budgets

It’s inefficient and, frankly, unwise for a growing business.

Good news. TradeGecko’s inventory management software is designed to streamline the purchase order management process.

Related Blog: Simplifying purchase orders

How TradeGecko can simplify and manage purchase orders? 

Our purchase order features enable businesses to:

  • Create and edit purchase orders independently or from directly within a forecast report;
  • Receive Add purchase order items via the Stock Receiving App barcode scanners;
  • Save and email or print purchase orders;
  • Complete the purchasing workflow;
  • Mark purchase orders as received or partially received;
  • Easily generate reorder reports and demand forecasts to know exactly when reordering is needed;
  • Quickly audit all purchase orders generated within the system, regardless of status.

Related Blog: Purchase order landed costs with TradeGecko inventory management software


With an integrated approach to inventory management, TradeGecko makes creating and managing purchase orders simple and easily referenceable, trackable and super simple.

From the dashboard, you can easily create, review, and update all outstanding purchase orders, with stock levels and pre-loaded supplier information all in the one place. Prices are also automatically adjusted to match different quantities as needed.

Like all of TradeGecko’s functionality, the PO management dashboard enables growing businesses to work smarter, accurately plan for the future, and provide a better customer experience.

If you want your time back and want to minimize the risk of human error, use a purchase order management system. TradeGecko makes creating and managing purchase orders super simple. 

TradeGecko is a powerful platform for managing your commerce business.

Speak to us to learn more about TradeGecko

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