What is an Open PO?

When a company buys good and services from suppliers, it issues a purchase order (PO) for the purchase. The PO acts as a contract to buy and contains specific price, quantity, payment and delivery terms.

Definition

A purchase order is a document used by a business to request a supply or service in return for payment, generally set for a later date.

Types

The standard PO allows a customer to order one time against the referenced PO number and the PO gets closed after fulfillment of the specific product or service. The standing or blanket PO allows a company to order the same product multiple times using the same PO number over an extended purchase period.

Status

An open POs status changes based on the purchase activity associated with the PO. The PO can change from open to closed, canceled, back-ordered, incomplete and more depending on the system used.

Significance

A company can quickly identify its cash requirements to cover expected receipts through the total dollar amount of open purchase orders.

Considerations

Resolve open PO issues (quantity, quality or price discrepancies) immediately. Unresolved issues cause problems in other functional areas (receiving, accounts payable and customer service).

References

• Allbusiness.com: blanket purchase order