Monthly Archives

June 2018

how to reject a customer's purchase order

How to Reject a Customer’s Purchase Order (Politely)

By | Purchase Order Plus | No Comments

As a business owner or a PO manager you will sometimes be unable to fulfill the customer’s wishes or to work with them for some other reason. Rejecting a customer is not easy and if you don’t do it right you risk alienating that customer from your business forever. This is why it’s important to know how to reject a customer’s purchase order.

Why Would You Reject a Customer’s Purchase Order?

There are basically two types of customers you can reject a PO from. The first one you don’t want to work with in the future for one reason or another. Perhaps your company already had some issues with this customer, such as late or slow payments, discrepancies in their previous purchase orders, bad credit and so on. Declining this customer’s purchase order is just a convenient way to cut any ties with them in a polite “thank you for your business, but kindly take it elsewhere” way.

In other scenarios, however, you might want to continue your dealings with the client, but can’t accept their PO. For instance, there may be nothing wrong with the customer per se, but your company doesn’t have the quantities of goods they are looking for or the shipping deadline is too narrow. In this case, instead of losing the client (probably to your competitors), you should sit with the client (or have a phone call), explain the situation and try and find a way to solve the problem in a way that benefits both sides.

What to Say to the Rejected Customer?

Sometimes, telling the whole truth is not a good idea. You want to avoid telling the client anything that can put your company in a bad light. Things like “we are having financial trouble” or “the IRS is currently investigating us” are not something the customer will be happy to hear. In fact, it will probably send them a signal to take their business (and money) elsewhere.

Still, you need a reason for declining a customer’s purchase order. This can be a simple “we apologize, but we can’t take any more clients at the moment” or “we’re sorry, but we can’t fulfill this PO in that deadline”. What you choose to tell the clients will depend on whether you want to work with them in the future or not.

The bottom line is that you don’t have to go into details. Just provide a general, but clear reason for declining.

Do You Want to Keep the Customer?

The issue may not be with the client. In fact, you might want to continue working with them, but for whatever reason you have to decline their PO. Instead of just shutting the door, try extending your hand to help solve the problem. For instance, if you’re not able to fulfill the purchase order in that quantity, let them know and ask if they can extend the deadline or allow you to send the order in parts.

If, on the other hand, you can’t find a way to fix the problem, there is still one thing you can do to help the customer. Tell them where they can complete their order. It’s not perfect and you’ll be sending the customer to your competition, but you’ll stay in their good graces. And, who knows, maybe the competitor will return the favor?


Rejection is just a part of life (and business). Sometimes you just have to do it. The important thing to remember when you reject a customer’s purchase order is to be clear and polite.

Want to make purchase order approval easier for your team? Try Purchase Order Plus

What are the pros and cons of purchase order financing

Pros and Cons of Purchase Order Financing

By | Purchase Order Plus | No Comments

We’ve been talking about PO financing for a while now here at Purchase Order Plus, about what it is, how to apply for one, where to get it and what kind of businesses are the most suitable for this type of funding. Throughout this article and this one, we established that purchase order financing can be a good option for many business owners when they are short of cash and need to fulfill a large PO.

But is purchase order financing always a good option? Let’s take a look at the pros and cons of purchase order financing to find out:

Pros of Purchase Order Financing

There are several advantages to using PO financing, but the biggest are the following four:

  1. Easy access to cash

When it comes to ease-of-access, you’ll likely find purchase order financing to be much more convenient than getting a regular bank loan. In fact, financial institutions who deal in PO financing, or “factors” will usually release funds within 24 hours.

  1. You pass on the collection risk and responsibility

With bank loans, the collection risk and responsibility fall to you and your company. This is not the case here though. Factors normally accept non-payment risks as a part of service. What this means is not only that you get this type of funding quickly (see the first advantage), but it also doesn’t come with as many collection risks in case something goes wrong.

  1. No loan installments

Try to take a loan at a bank and it will probably turn out twice as expensive than the amount you’ve loaned. For this, you have monthly loan installments to thank. PO financing doesn’t include monthly loan installments as it is not a loan in the classical term. Instead, you pay it back in full when the customer pays you for the goods.

  1. Cheaper than credit cards

Using your credit card to make bank payments seems convenient, but it can actually be more expensive than you realize. purchase order financing, on the other hand, is a cheaper alternative to this.

Cons of Purchase Order Financing

Did you like those pros of PO financing? Well, I’m afraid I’ve got some bad news. Not everything about them is so good. In fact, there are a few disadvantages here as well. Here are a few of the biggest:

  1. Factors charge an upfront fee

Traditional loan services let you repay your loan in several installments and models. This is probably their biggest advantage over “factors”, who demand an upfront payment from their clients. In other words, you have to make a payment even before you actually earn the money from the PO.

  1. The risk of alienating the customer

If you’re using PO financing, you run the risk of alienating the customer. Here’s why. You don’t actually directly communicate with them. Instead, when they’re ready to make a payment, they don’t pay your company, but the factoring firm. You can imagine how some customers can do a double take when they learn about this. To them, this means that your business is in financial trouble.

  1. You don’t get the full amount

While factors take a great deal of credit and collection risk, they compensate this by keeping a portion of the funds they will lend you until after your customer pays for the purchase order.

  1. It’s only a short-term solution

Purchase order financing is a bit like applying a patch to your clothes. You won’t have a whole in your trousers any more, but you haven’t really solved the long-term problem of needing a new pair. As such, PO financing should only be considered a short-term solution.

Do you have anything to add or ask about the pros and cons of purchase order financing? Let us know in the comments below the post and don’t forget to subscribe your email for our PO software, Purchase Order Plus to receive early updates.

Best practices for purchase orders

10 Best Practices for Purchase Orders and Requisitions

By | Purchase Order Plus | No Comments

To ensure the accuracy and control of your purchase orders and requisition, it’s always good to have certain best practices in place. Here are 10 best practices for purchase orders and requisition you would do well to follow in your company:

1. Create Purchase Order Copies

As a buyer you will need a copy of the PO, while another copy needs to go to the seller. In addition, every other department involved in the purchase should also be sent a copy of it. Of course, to avoid duplication (happens with paper POs), you can make digital copies available to everyone that needs them.

2. Use an ERP System

It is much easier to confirm and file POs using an Enterprise Resource Planning System (ERP), which will assign a number to your purchase orders.

3. PO Cancellation Process

Accept only authorized cancellations in writing or via email. Purchase Order cancellation is a serious thing and should be approached like that. Make sure to file a copy or a printout (in case of an email) of the cancellation along with the original PO.

4. Control PO and Requisition Costs by Budgeting at Department Level

A good purchase order software, like Purchase Order Plus, can tell you and your department managers whether the PO fits your budget both on company and departmental level. It does not mean giving up control of your budget. For instance, if the requested purchase is over the budget, the PO software will flag it and the department manager can reject it or approve it accordingly.

5. Maintain Transparency of Your Purchase Orders

Ensuring transparency of your purchase orders will go a long way to not only help you control your internal spending and costs, but to also comply to external audits. You should have easy access to every element of the purchase order, including the quantity of the purchase, availability, budget, as well as seller contracts, including service level agreements you’ve made.

6. Accept POs Only from Authorized Personnel and Sources

It is vital to accept and approve purchase orders only from authorized personnel and sources. Even if they work with the same seller you’ve been dealing with for a time, this will make sure to prevent duplicating orders and having redundant POs.

7. Properly Confirm and File Changes

It is not uncommon for a purchase order to change. These changes, however, should be properly made, confirmed and finally filed (a hard copy or email printout) along with the purchase order itself.

8. Ensure a Self-Service Procurement for Your Employees

Another good practice is to use a purchase order software that allows your staff members self-service procurement. This way, those not in the procurement can also submit PO templates with vendors (at least those pre-approved). In addition, self-service procurement also enables your departmental managers to approve lower value items themselves so you don’t have to do everything.

9. Keep PO Documentation

You might be inclined to get rid of the purchase order documentation as soon as you receive and approve the PO, especially if you are still using paper POs, but hold on. You should keep this documentation for a long time because of audits in order to verify their accuracy. Put someone in charge of making sure proper purchase order documentation is in place and filed correctly.

10. PO QA

Each purchase order should be properly entered into the system and filed. This is where a quality control (QC) person comes into to ensure all PO details are accurate, including price, item description, quantity, shipping details and so on.


By following these best practices for purchase orders and requisitions it gets much easier to keep control of the many PO aspects. There is very little room for error here, so each of these can help you get rid of the guesswork.

Do you have any questions about best practices for purchase orders or POs in general? Let us know in the comments below and make sure to subscribe your email to our Purchase Order Plus software and get important updates.

how to qualify for PO financing

Who can Use PO Financing and how do You Qualify?

By | Purchase Order Plus | No Comments

If you need a quick way to complete a particularly impatient customer’s purchase order, but don’t possess sufficient funds at the moment, purchase order financing, or just PO financing, can be the right choice for you.

Essentially, this is a loan you receive from a financial institution (a bank or specialized loan company) before delivering the goods to and invoicing your customers.

Who is PO Financing for?

Can anyone use PO financing ? As you’ll find out in this article all kinds of companies can use purchase order financing (or funding), including:

  • Distributors of goods
  • Resellers of those same goods
  • Wholesalers
  • Importers of finished products
  • Exporters of those same products

The list doesn’t end with just these, of course, and is much longer, so if you’re wondering, yes, your company is very likely a good candidate for this type of funding.

How Would One Qualify for PO Financing?

This leads us to another important questions. If your business is a good candidate for purchase order financing, how would you qualify for it exactly?

As long as you operate a reputable business and work with the like-minded suppliers and customers, you are on a good way to qualify. Of course, keep in mind that the exact qualifying terms will vary from one financing company to another so it is always a good idea to hear their terms before you decide whether to go with them or not.

For instance, one important requirement to qualify is your profit margin. Here, most banks look for a margin between 15% and 20%, but there are some that go for a minimum of 25%.

Another requirement is that you need to deal with customers and suppliers that have a solid credit record and are therefore creditworthy. This typically means working with customers and suppliers who haven’t filed for bankruptcy recently and are consistently paying on time. Of course, many loan providers will have their own, extra, requirement and will check the customer’s creditworthiness through a common credit bureau.

What Do You Need to Look for in a PO Financing Company?

This was about your company and your customers and vendors qualifying for purchase order financing, but what about the other way? How can you tell if you found a good PO financing company? There are several tell-tale signs that can tell you if you made the right choice or not.

You don’t want to deal with just anyone, so here are some things to consider and ask:

  1. What is their history with PO financing? How long have they’ve been doing it?
  2. How long have they been in the financing business, more importantly, PO financing business?
  3. Who were some of their previous clients? What is their opinion of the PO financing provider? Is it positive or negative?
  4. What products do they offer? Do they have trained personnel to handle purchase order funding?
  5. How do they receive payment from your customers and how (and when) will they pay the suppliers? Do they wait until the customer pays or do they pay the supplier upfront?
  6. What background (especially credit) checks do they perform on your customers and suppliers?
  7. Do they have direct communication with your customers and how? How do they communicate with suppliers?
  8. What are their own costs (including the breakdown of those costs)?

By answering these questions, you can be one big step closer to finding a good PO financing company and, of course, getting a purchase order funding that you need.


And that’s it. Now you know what types of companies can find value of PO financing, how to qualify for it and what to look for in a financial company that offers them. The rest is up to you.

Hope you found this article useful and if you have any questions or comments about the topic or just purchase orders in general, let us know in the comments below and if you’re looking for more cashflow control and better reporting, don’t forget to sign your email for our Xero mobile add-on software Purchase Order Plus.