Whether you own a small company or a big one, you must be aware of the effective uses of Purchase Order Log. A purchase order is a contract made between the buyer and seller of goods. A Purchase Order Log creates an effective paper trail in case of purchases made by your company. There are many uses of a Purchase Order Log. A purchase order has a sequential and unique number for the sale or the purchase of the product, the price, the quantity, the bill to, and the ship to address. It also includes the signature of the authorized signatory, the terms of payment, and the mode of payment. This is a very important document to have.
An effective Purchase Order Log system has many benefits. You can approve a cost before it is incurred with an effective Purchase Order Log system. With a Purchase Order Log system, you can also improve internal controls. With a good Purchase Order Log system you can manage costs that are already committed to and improve the profitability of a project.
The most important use of a Purchase Order Log is the approval of expenses or purchases before these are made. This comes in handy when a company wants to manage its budget better, understand the costs incurred, and operate projects proactively. The approval is done at the very beginning of the process of purchase and that is as it should be. The suppliers and vendors also come to know the team members that are authorized and the limits of their approval.
Here is Preview and Download Purchase Order Log Template
Internal control over budget and expenses can be done effectively with a Purchase Order Log. When a company reviews the items purchased and received compared to the orders placed and the price of the order, they can control the budget. The key is the unique number assigned to a purchase order. This number is common to the company and the documents that the vendor or supplier has. The delivery ticket, purchase order, and invoice all have the PO number. The sequential numbers add an element of control to the internal working of the company and helps limit abuse within the company.
Both buyer and seller are supposed to commit to the terms and conditions laid out in a purchase order. Costs committed to and not incurred go towards the effective management of a project. If there are items on the Purchase Order Log that have prices that are volatile, are in demand, or require a long lead time, a purchase order comes in handy to establish what was originally ordered for and at what price.
A Purchase Order Log can also be used to calculate the profit of a project. When calculating the profitability of a project it is important to look at committed costs as well as incurred costs. Purchase orders in addition to invoices received gives a complete picture. Calculating the committed costs can give an accurate picture about the true profitability of a project. Total costs, that is incurred costs and committed costs plus the expected revenue is the projected profit of the project.
