How to Set Up a Purchase Order System for a Small Business

As a small business owner you need to control costs and inventory. One way to do this is through a purchase order system that will track employee purchases and prevent all unauthorized purchases. This will also prevent double ordering of materials and payment on erroneous invoicing. There are several ways to set up a purchase order system. You can do this electronically with purchased software programs or keep it simple with physical "PO" books. This article will describe the procedure for setting up a simple and workable purchase order system for a small business.

Instructions

1. You will need to determine the type of purchase order form you want to use for your company. Keep it simple. Suggested information to include: company name and address; purchase order number; date; vendor; quantity ordered; description of Items; price; ordered by; special Instructions; job or location; and corresponding invoice numbers.

2. Order your PO books from a local printer. An 8 1/2 X 5 1/2 duplicate or triplicate form book works well for most businesses. White copy stays in the book for reference; pink copy is given to accounts payable clerk and is filed alphabetically according to vendor until invoice comes in; yellow copy is given to employee doing the purchasing for their company records.

3. To set up the system, all employees that are allowed to purchase materials must use a PO number. You can give each employee their own books or have a central office person that gives the PO number out. If they have their own books they will record all information required before making a purchase and will use the PO number to record on vendor delivery or order tickets. If a central person is used, all employees will call, give all pertinent information and request a PO number to give to the vendor.

4. Managing the system. All pink copies and delivery or order tickets are given to the accounts payable clerk to match with corresponding invoices to pay. This is best if kept in alphabetical order. As copies are matched to invoices, the a/p clerk can check pricing and quantities to insure that the invoice is correct before paying. They can also job cost each purchase correctly.

5. The orginial book with the white copies should be kept for future cross referencing on orders. Records can also be maintained from the information provided on the purchase orders to prevent double ordering, to track inventory, track purchases made by each employee and job costing.

Tips & Warnings

• Control access to the purchase order books so that purchasing is only done by those employees with authorization. Set up detailed company rules regarding use of POs and charging by employees.

References

• Business Link: Set Up a Basic Record-keeping System