If you think that purchase orders are not for your company or have some other misconception about them, here are the biggest 5 purchase order myths you need to stop believing in right now.
1. “Our Current System Works, We Don’t Need to Change it”
You don’t have to wait until the roof collapses on your head to start fixing it. By then, it will already be too late to do anything. The same goes with your purchasing process. The way your company does things may work now, but when was the last time you really analyzed if it is efficient. Have you considered if there was a better way to do things?
Furthermore, your current system might work well for a small company, but once you start expanding your business, it will start being more an obstacle than an asset. So start thinking about implementing purchase orders now, even if you don’t need them, before it is too late.
2. “We Don’t Need Purchase Orders”
This is one of my personal favorite purchase order myths. Some companies see purchase orders as an unnecessary step and think they can do without them. Just because your company is small or doesn’t order a lot, doesn’t translate to “you don’t need purchase orders”.
A purchase order is a legally-binding document that protects you in case any problems in purchasing arise. So next time the supplier fails to deliver the goods, you’ll be more than happy that you have that paper trail with you.
3. It’s the Same as Invoice
No. Purchase orders are definitely NOT the same as an invoice. Yes, they have a few things in common and share some same or similar features, but so do chickens and geese. Both are feathery and lay eggs. But you wouldn’t mix one for the other, would you?
A purchase order is created by the buyer and indicates his orders. On the other hand, an invoice is created by the seller and tells you about payment terms. So, no, they are definitely not the same thing. Think of a PO as a Contract of Sale and of an invoice as an Confirmation of Sale. One is use to order goods and the other is a reminder for the buyer to pay for the ordered goods.
4. Only the Purchasing Department Needs Them Anyway
Another quite common misconception about purchase orders is that they are only really useful to the company’s purchasing department. This is simply not true. Without them, you would have a much tougher job keeping track of your spending and knowing where your money is going. But with purchase orders, you can more easily identify critical spending areas and reduce the unnecessary ones.
5. They are Way too Complicated
This may have been the case in the past, when everything was done on paper, but hopefully your company is way past that point by now. These days you can create purchase orders online. Accounting software like Xero can allow you to keep the essential information, like your company name and information and the vendore’s name and information and just change the items you are ordering, their amount or some other detail.
Did we manage to bust the biggest purchase order myths for you? Dou think there are some other misconceptions about purchase orders we should have covered here? Let us know about them in the comments below.
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