Purchase orders and PO numbers
What is a purchase order (PO)?
A PO is a document sent by a buyer to a seller, indicating their intention to purchase products or services.
A typical PO document will indicate types, quantities and agreed prices for the products and/or services, along with an indication of the date they require delivery, the order date, delivery address, billing address, requested terms, a PO number and contact name.
Purchase orders from your client to you
Why is a PO important for an Account Manager?
It allows your client to clearly communicate their intention to buy.
It is proof of approval that your client is happy with the price and project details that you have quoted.
It should eliminate any "bounced" invoices.
It protects your agency in case your client refuses to pay the invoice.
Some clients will not accept your agency invoice unless it has a PO number on it, supplied by one of their employees.
Do you need the PO document or just the PO number?
It is preferable to receive the whole PO document, however many clients do not provide this type of documentation. Some clients will give you a PO number, though a number alone does not confirm the quantity/price/products/services that they are authorising. You can only assume that they are giving approval based on the most up-to-date quote that you have supplied (and assumption is often dangerous!).
Similarly, a client may give you their name to use, instead of a PO number. This would indicate that they do not have a formal PO generation process for their company. Whatever name or number they give you as a reference, you will need to include that in your invoice for the project (so your client can reconcile the invoice to their paperwork).
For all clients who must have one of their PO numbers showing on your agency invoice, make sure you are chasing that PO number as early as possible. It is super-frustrating to get to the end of the month and not be able to send out an invoice because your client is slow getting the number to you.
Purchase orders from you to your suppliers
When you, as an Account Manager, order products or services from an external supplier, you will need to provide them with a PO document (or PO number).
Why you should give a PO to your suppliers?
For all the same reasons as listed above, plus:
It enables your accountant to easily marry up a supplier's invoice to the correct project and correct Account Manager.
You will see what has been ordered (and possibly delivered) but not yet invoiced or paid for. This is especially important when your accountant prepares your end of month (or end of year) revenue and profit reports. The PO will highlight if you have a financial commitment that needs to be accounted for (especially if the invoice to your client goes out in one month, but the supplier invoice is received in the month following).
It allows your accountant to immediately see if the supplier invoice total matches the PO number. If it does, they are able to pay the invoice without having to question you on its accuracy.
A PO is a legally-binding document and proof of the products/services ordered.
What would happen if you do not give a PO to your suppliers?
Your accountant will waste time trying to figure out which project (or Account Manager) a supplier invoice belongs to.
Your accountant will be asking you to approve the price and details of each supplier invoice.
If a supplier purchase is not backed up with a PO, this can throw your financial reporting out (not in your favour). It can also give a false cash-flow figure for the business.
You may get into a "he said, she said" dispute regarding order details.
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