What is a Purchase Order? How PO Automation = Retail Success. The Essential Retailers' Guide.

Learn all the vital stuff about purchase orders, why they're so necessary and how automation is a must-have if you’re serious about accelerating your retail business growth.
min read
Retail Express Team
June 25, 2022
Retail Express Team
June 25, 2022

Table of contents

Purchase Orders (POs) are priceless things in the retail business. They allow you to track your stock orders, keep on top of your inventory management, minimise mishaps and help maintain clear communication with your vendors.

POs are also legally binding documents, so they can help keep you clear of trouble. And when you can automate them, you can free up loads of valuable time, and business gets infinitely  better. (Better still, include your accounting software like Xero or MYOB into this automation and you’re even further ahead).

Here's what you need to know about POs.

A Promise or a purchase order?{A Promise or a Purchase Order (which would you prefer)?}

It doesn't take long in retail to realise that promises will only get you so far. 

We've all listened in horror to tales of wholesale order disasters — or survived them. The desperately anticipated (and pre-paid) order gone missing somewhere between here and Portugal. The factory manager who was "having a little financial trouble...". The massive delivery that was Not What Was Ordered — and worse — could never be returned.

Wholesale order disasters can be more than just stressful; they can put you out of business.

That's where purchase orders come in.

Unlike promises, purchase orders give you legal protection and spare you from dramas (providing you’re dealing with Australian or NZ companies, and certain others). But they can also offer a bucketload of additional benefits for your retail business.

Let's take a closer look at what a purchase order entails, the PO process, how automation can really shift gears for your business and the benefits this provides. (Hint: loads!)

Like to know how to optimise your supply chain, and automate your purchase orders and stock control with AU & NZ's #1 POS software? Book a free one-hour demo with a retail professional today.

What is a purchase order?{What is a purchase order? (purchase order meaning)}

A purchase order (PO) is a legal document that a buyer (that's you) sends to a seller (that's your supplier/manufacturer/wholesaler). This document secures the sale of a product or service to be delivered at a specific date. It contains the names of both buyer and seller, company information, quantities and specifics of requested products, and sometimes, the delivery date.

 Once the seller accepts a purchase order, it becomes a legally binding document. This legal binding offers both parties various benefits and protections. (We discuss this below)

But POs do even more than offer legal protection. They offer a way for you to track your stock orders, keep on top of your inventory management, minimise mishaps and keep communications clear with your vendors. And if you're in retail, you know how much of a big deal these issues are.

Once the seller accepts a purchase order, it becomes a legally binding document. This legal binding offers both parties various benefits and protections.

What is an invoice?{What is an invoice?}

Invoices are different from purchase orders. An invoice follows a purchase order. The vendor will officially request payment for goods or services reflected in the purchase order. This request usually happens at an agreed transaction time, e.g., when manufacturing is completed, or goods have been shipped (and the buyer is satisfied with the condition of the goods).

The invoice contains precise information on the related purchase order, specific items, due payment date and payment information such as bank details. 

Note: Due dates vary and can sometimes be negotiated, depending on your relationship with the vendor. As your relationship with the vendor develops, often you can agree to a due date that's more suitable for your cash flow.

Purchase order vs invoice: what's the difference?{Purchase order vs invoice: what's the difference?}

A purchase order (PO) is an order request, while an invoice is a payment request. Also, the buyer creates the purchase order. In contrast, the seller creates the invoice to secure payment for the transaction. The invoice is usually sent after the purchase order.

What does a purchase order include?{What does a purchase order include?}

You'll need to include the following in your purchase order:

  • Purchase order date
  • Purchase order number
  • Delivery date (if applicable)
  • Shipping method
  • Buyer details (e.g., company name, contact details, delivery address)
  • Vendor details (e.g., company name, contact details, delivery address)
  • Items ordered (e.g., SKUs, quantities, any necessary variables, price per unit)
  • Total price
  • Tax information (where applicable)
  • Agreed payment terms and any pertinent instructions

Retail inventory software like Retail Express POS software gives you all the tools you need to easily create your PO in one easily accessible, central location. This centralised system gives you greater control — and peace of mind. It makes financial planning and accounting easier as you'll see all your stock on order with various suppliers and the expected delivery dates. It also makes it easier to offer endless aisles and place special orders. inventory software will save you a lot of valuable time.

Here's a glance at what the screen of your Retail Express purchase order software would look like and the details you need to provide to create your PO in our software system.

Retail Express Purchase Order example

How do purchase orders work?{How do purchase orders work?}

Here's how the purchasing order process works. Keep in mind, if you use software automation, you'll still have control, but a lot of the thinking and doing can be done for you.

  • Create a purchase order: You draft a purchase order after deciding that you need more of a particular product. In this order, you include the details outlined above. 
  • Send the purchase order: You send your purchase order to the appropriate vendor
  • Order acceptance: The vendor notifies you that they either accept or decline the order (for example, if they cannot manufacture or obtain the stock). Once this has occurred, the PO is now a legally binding document.
  • Order fulfilment: The seller fulfils the order based on your PO details and sends the order to you, along with a packing slip and/or receipt.
  • Receipt of goods: After receiving the goods, you perform a quality check to ensure the items meet standards. Once you approve, the seller will send an invoice for the order, including the PO number.
  • Payment and closure: Now that you have received the goods in satisfactory condition, they pay the invoice, and the purchase order is closed.

How supply chain & inventory software helps your retail business{How inventory software helps your retail business}

We've discussed what to include in a purchase order and how the process works. But if you're a busy retailer, you'll want to know more ways of streamlining your processes and gaining clarity.

This is where Retail Express cloud-based inventory and Purchase Order software can help you further. 

Retail Express gives you the flexibility to create purchase orders in different ways. You can:

  • Create a single Purchase Order (a.k.a. a manual purchase order)
  • Create multiple Purchase Orders – This is handy for ordering from multiple outlets for one supplier, multiple suppliers for one outlet or perhaps one supplier for one outlet but with multiple invoices. 
  • Automatically create Purchase Orders using the stock replenishment feature – Based on manually set levels, you can automatically purchase more stock. You can still maintain control and manually edit as required. (We discuss this below)

You can also choose from various PO templates to suit your ordering requirements. 

NB: Retail Express will do more than simple purchase order and invoicing software, which is vital when choosing software that’ll grow with you.

Purchase orders, Xero & other accounting software integrations with Retail Express 

You can integrate your accounting system with Retail Express, too. For example, Retail Express natively integrates with Xero accounting software to streamline your accounting further. So, for example, your supplier invoice number will synchronise your accounting package instantly. Accounting systems such as MYOB, Netsuite and SAP also integrate with Retail Express.

automatic stock replenishment with Retail Express helps calculate optimum inventory levels

Eliminate understocks & overstocks with automated store replenishment{Eliminate understocks & overstocks with automated store replenishment}

As your business grows, you'll appreciate even more automation. Retail Express' inventory management software offers automated store replenishment. This will help with your purchase orders, along with other inventory matters. Automatic store replenishment will calculate the optimal inventory mix for each store based on actual demand and real-time data.

Store replenishment can also help in areas outside of purchase orders. For example, it can:

  • Allocate stock based on your store performance, allowing your bestselling stores to get stock in priority.
  • Create stock transfers from your 3PL/warehouse to your stores – again saving tedious admin hours
  • Factor in variables such as lead times, run rates and all stock statuses to improve your inventory planning
  • Allocate stock needed for stock transfers – eliminating the problem of double selling to other customers
"Retail Express slashed admin hours from store and warehouse while allowing customers to get accurate ETAs. It's saved us over 450 labour hours per week."
- Corey Davidson, Johnny's Furniture

Benefits of purchase orders{9 Benefits of Purchase Orders}

If you're an established retailer, we know you already appreciate the benefits of a purchase order system. However, if you're starting or growing your retail business, you must start using them to avoid costly mistakes. 

1. Keep it in writing-

As we've mentioned, promises can quickly lose appeal. In business, you need to keep everything in writing. As purchase orders are a legally binding contract between you and your suppliers, you'll be in a better position than with a verbal deal or a quick email if any problems develop.

2. Keep track of your orders-

Keeping track of what you've ordered is a great benefit of purchase orders. This is especially easy if you have digitalised your business with the right POS software. If you know exactly what you've ordered and when it will arrive, your business will be in much better shape.

3. Share the load-

One simple purchase order system means that more than one staff member can place POs. This frees up the responsibilities and burdens of the manager and allows other staff to share the responsibility. And, your team can easily see what's been purchased and is on its way.

4. Avoid delivery problems-

Purchase orders make everything clear. Your staff can crosscheck the delivery against the purchase order when orders arrive. If there are any problems, the supplier can be contacted immediately.

5. Avoid overpaying-

Purchase orders allow you to set your prices. The buyer and seller have agreed to a price, and both parties are legally obliged to adhere to that. If you later receive an invoice for a higher amount, you can check this against the PO and prove that this was not the established amount. 

"With visibility of our stock across all our stores, we can ensure we're never over or understocked". 
– Grant Mayo, Nutrition Warehouse

6. Avoid buying too much-

Once you've created a PO in your software, you can see what you have coming in. This visibility will prevent you from blindly overbuying. After all, the last thing you need is to be stuck with excess products and a problematic cash flow.

7. See your expenses -

Not only will you know what you've ordered, but you'll know how much you have to pay. With all your POs in one centralised system, you can forecast when you have to pay, making cash flow easier to manage. This clarity is also vital for organising your accounts at the end of each financial year.

8. Be informed and in control-

Purchase orders are a great way to look back and make informed decisions. You can see how much you ordered, how long it took to arrive, profit margins, what sold well and what didn't, and more. Armed with this information, you can be more successful in placing future orders. POs also help to spot potential problems. For example, if a previous order has taken less time to manufacture or ship, you can find out why. It's all good information to have.

9. Know when to expect goods-

Suppose all your purchase orders are in your fulfilment and inventory software. In that case, you can make this information available to your sales staff. This way, they can advise customers on when to expect goods, and if there's certainty, it's easier to make a sale.

Next steps-

Find out how Retail Express inventory management software can automate your purchase orders so you can:

  • Free yourself from hours of unnecessary manual tasks
  • Streamline your processes
  • Reduce human error
  • Enjoy greater visibility
  • Make smarter business decisions
  • Get the competitive advantage you need to accelerate your business and compete in today's retail world

Book a demo with a retail expert now. It's free, fast and lets you compare us to others.

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