A Purchase Order is a binding contract with your Supplier that you promise to buy a set of items under given conditions.

It is similar to a Sales Order but instead of sending it to an external party, you keep it for internal records.

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1. Prerequisites

Before creating and using a Purchase Order, it is advised that you create the following first:

• Supplier
• Item

2. How to create a Purchase Order

A Purchase Order can be automatically created from a Material Request or Supplier Quotation.

1. Go to the Purchase Order list, click on New.
2. Select the Supplier, required by date.
3. In the items table, select the item by code, you can change the required by date for each item.
4. Set the quantity and the price will be fetched automatically if set in the Item master.
5. Set taxes.
6. Save and Submit.

2.1 Setting Warehouses

• Configure Target Warehouse: Optionally, designate the default target Warehouse for the delivery of purchased Items. This setting will automatically populate the Item table rows.

2.2 Fetching Items from Open Material Requests

Items can be automatically fetched into the Purchase Order from open Material Requests. To enable this functionality, follow these steps:

1. Select a Supplier in the Purchase Order.
2. Set the default Supplier in the Item form under Item Defaults.
3. Ensure that a Material Request of type ‘Purchase’ is present.
4. Click on the “Get Items from open Material Requests” button located below the Supplier name in the Purchase Order. A dialog will appear displaying Material Requests containing Items for which the default Supplier matches the one selected in the Purchase Order.
5. Select the relevant Material Requests and click on “Get Items.” The Items will then be fetched from the selected Material Requests into the Purchase Order.

> Note: The Get Items from Open Material Requests button is visible as long as the Items table is empty.

3. Features

3.1 Address and Contact

• Select Supplier Address: The Supplier’s billing address.
• Select Shipping Address: The Supplier’s shipping address from which they’ll be sending the items.
• Address, Shipping Address, Contact, Contact Email will be fetched if saved in the Supplier master.

For India:

• Supplier and Company GSTIN: The GST Identification Number of your Supplier and your company.
• Place of Supply: For GST, Place of Supply is necessary. It consists of the state’s name and number.

3.2 Currency and Price List

You have the option to specify the currency in which the purchase order is to be stored. Additionally, if you set a Pricing List, the item prices will be retrieved from that list. Checking the “Ignore Pricing Rule” box will disregard any Pricing Rules set in Accounts > Pricing Rule.

Read about Price Lists and Multi-Currency Transactions to know more.

3.3 Subcontracting or ‘Supply Raw Materials’

Enabling the “Supply Raw Materials” option proves beneficial for subcontracting scenarios, particularly when you furnish the raw materials required for manufacturing an item. To know more, visit the Subcontracting page.

3.4 The Items table

• Scan Barcode: Items can be added to the Items table by scanning their barcodes using a barcode scanner if available. 
• Quantity and Rate: Upon selecting the Item code, its name, description, and unit of measure (UOM) will be automatically fetched. The default ‘UOM Conversion Factor’ is set to 1, but it can be adjusted based on the UOM received from the seller, as discussed in the next section. The ‘Price List Rate’ will be retrieved if a standard buying rate is set, while the ‘Last Purchase Rate’ displays the rate from the last Purchase Order. Rates are fetched if configured in the item master. Additionally, you can assign an Item Tax Template to apply a specific tax rate to the item. If item weights are specified in the Item master, they will be automatically populated; otherwise, you can enter them manually. 
• Warehouse: The warehouse where the items will be delivered is automatically filled if ‘Set Target Warehouse’ was specified in the Purchase Order. Via a Blanket Order, a Blanket Order can be linked for reference, and a ‘Project’ can be associated to track progress. Furthermore, a ‘BOM’ or Bill of Materials can also be linked to monitor progress. 
• ‘Qty as per Stock UOM’ displays the current stock based on the UOM set in the Item master. The ‘Received Qty’ field gets updated when the items are billed. 
• Accounting Details: This section is pre-filled for a Purchase Order. The ‘Expense Account’ is the account against which the PO is billed, and the Cost Center is the CC against which the PO is charged. 
• A “Required By” date on each Item: If partial delivery is expected, specifying the “Required By” date for each item informs the Supplier about the quantity to be delivered on a particular date, preventing over-supply and helping track Supplier timeliness. 
• Allow Zero Valuation Rate: Enabling ‘Allow Zero Valuation Rate’ permits the submission of the Purchase Receipt even if the Valuation Rate of the Item is 0. This may apply to sample items or items agreed upon with the Supplier.

3.6 Raw Materials Supplied

This section appears when ‘Supply Raw Materials’ supplied is set to ‘Yes’. This section shows a table with the Items to be supplied to the Supplier for the subcontracting process.

• Set Reserve Warehouse: When Subcontracting, the raw materials can be reserved in a separate Warehouse. On selecting the Reserved Warehouse here, it’ll be fetched into Item rows of the Raw Materials Supplied table.

Supplied Items Table

• Required Quantity: The quantity of items needed to fulfill the subcontracting requirements outlined in the Bill of Materials (BOM).
• Supplied Quantity: This field is updated when you generate Stock Entries to transfer materials from the Reserve Warehouse to the Supplier Warehouse using the Transfer button.

3.7 Purchase UOM and Stock UOM Conversion

You can adjust your Unit of Measurement (UOM) to suit your stock requirements within the Purchase Order.

For instance, if you’ve purchased raw materials in bulk quantities measured in boxes but intend to manage them in units (Nos), you can configure this in your Purchase Order.

1. Set the UOM as Nos in the Item master. Please note that the UOM specified in the Item master represents the stock UOM.
2. In the Purchase Order, specify the UOM as Box (since the material is received in boxes).
3. In the Warehouse and Reference section, the UOM will automatically be populated as Nos (from the Item form):
4. Indicate the UOM conversion factor. For example, if one box equals 1 kilo, input (1).
5. You’ll observe that the stock quantity is adjusted accordingly.

3.8 Taxes and Charges

If your supplier intends to apply extra charges such as additional taxes, shipping fees, or insurance costs, you can include them in this section. This ensures precise cost tracking. Moreover, if any of these charges contribute to the product’s overall value, they should be specified in the Taxes table.

Visit the Purchase Taxes and Charges Template page to know more about taxes.

The total taxes and charges will be displayed below the table.

To add taxes automatically via a Tax Category, visit this page.

Make sure to mark all your taxes in the Taxes and Charges table correctly for an accurate valuation.

Shipping Rule

A Shipping Rule helps set the cost of shipping an Item. The cost will usually increase with the distance of shipping. To know more, visit the Shipping Rule page.

 

3.9 Additional Discount

In addition to recording discounts per item, you have the option to apply a discount to the entire purchase order in this section. This discount can be calculated based on the Grand Total, which includes taxes and charges, or the Net Total, which excludes them. The discount can be specified either as a percentage or a fixed amount.

Read Applying Discount for more details.

3.10 Payment Terms

Sometimes payment is not done all at once. Depending on the agreement, half of the payment may be made before shipment and the other half after receiving the goods/services. You can add a Payment Terms template or add the terms manually in this section.

Read Payment Terms to know more.

3.11 Terms and Conditions

In sales/purchase transactions, specific terms and conditions may govern the provision of goods or services by the supplier to the customer. You can apply these terms and conditions to transactions, and they will be visible when printing the document. To know about Terms and Conditions, click here

3.12 Print Settings

Letterhead

You can print your request for quotation / purchase order on your company’s letterhead. Know more here.

Group same items’ will consolidate identical items that have been added multiple times in the items table. This consolidation can be observed when you print the document.

Print Headings

Titles of your documents can be changed. Know more here.

The seller’s Additional Discount, Payment Terms, Terms and Conditions can be recorded in your Purchase Order.

3.13 More Information

This section displays the status of the Purchase Order, including the percentage of items received and the percentage of items billed. If this is an Inter-Company Order, you can link the Sales Order here.

3.14 After Submitting

Once you “Submit” your Purchase Order, you can trigger actions these actions:

• You can Add, Update, Delete items in the Purchase Order by clicking on the Update Items button. However you cannot delete items which has already been received.
• Status: Once submitted, you can hold a Purchase Order or Close it.
• Create: From a submitted Purchase Order, you can create the following:
  • Purchase Receipt – A receipt indicating you’ve received the items.
  • Purchase Invoice – An invoice/bill for the purchase order.
  • Payment Entry – A payment entry indicates that payment has been made against a purchase order.
  • Journal Entry – A Journal Entry is recorded in the general ledger.

   

4. Related Topics

1. Request For Quotation
2. Purchase Taxes and Charges Template