What Is a Purchase Order Request?

Video Transcript

"My name is Miranda Chook, a CPA. In a manufacturing distribution business, the purchasing process usually spends the processes from merchandise planning to authorization, approval and placing of orders with vendors. There are usually two main forms in this process. One is the purchase order request and the other is a purchase order itself. They can be hard copy and or electronic versions depending on a company's ERP system. Now management has usually setup approval limits and advance authorizing certain employees as to type of product that they are authorize to purchase and or quantities and dollar amounts as well. So approved employees will initiate a purchase order; the other purchase order request and minimal label include the parts or part number, description and quantity and ship dates on their request. Their request then moves on to the purchasing department and they will add additional information such as payment terms if the; if a preferred vendor has not been stated; they will go to their approved vendor list and add that and actually place the order with the vendor. Some companies actually also use blanket purchase orders. So purchase order request are applied against the blanket and only certain portions of the quantities are drawn down whereas the whole amount has already been approved in advanced. The whole process should be setup to ensure that only valid and appropriately approved transactions actually go through the system to actually initiate purchases and then move on to be recorded in the accounting system."