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A Purchase Order Has Importance

August 15 2010

After a request for information is sent out and the returns are analyzed, a purchase order is then created for the item in question. In most cases, the information that was requested was pertaining to specifications and price of the units. Companies make money by utilizing their budgets in the most efficient ways. Making the right purchases is part of this process.

The purchase order is a very specific request of an item or number of items a company already knows about and can utilize as part of their business. This form is used in transactions between two businesses to exchange merchandise or services. Money is exchanged, but usually after the merchandise has already been delivered at a predesignated time.

Within a purchase order are some very specific items so the transaction can be carried out seamlessly. The description of the item or items being requested has to be present, along with the terms of payment. In many cases, the terms of payment might not be included because there is a contract between the two companies that already spelled out the terms.

The purchase order can also be used by a business to make it appear on the books that they are a profitable business. When a business demands payment on purchase orders from other companies to be made within 30 days but the purchase orders they acquired items on are not paid for 45 to 60 days, there is an imbalance on the accounting sheets.

This type of imbalance is done to give a false reading on how profitable a business is. This type of business practice can artificially boost a company’s stock price, along with other advantages. This all occurred by the way a purchase order and how dealing with other companies is handled.

A purchase order is the allocation of items or services where payment is not immediately rendered upon delivery. Most business deal with this business practice in a respectable way, but this is not the case in all instances.