Successful businesses have a flair for sales—they excite their customers at home and in international markets. But they also possess another quality: great businesses are on top of the detail of their trading, with a clear view of what customers ordered when it is due for delivery, and how and when they will pay for the goods. And here, the humble purchase order can be your business’s best friend.

The RangeMe platform gives you a golden opportunity to put your products in front of retailers all over the world to inspire and delight them. But once you’ve clinched the sale, a purchase order, or PO, formalises the deal. Whether you’re working with a retailer in the U.S., Europe, or in Australasia, their PO for your product is a crucial document, for all sorts of reasons:

POs are legally binding orders

Don’t confuse a PO with an invoice. A PO is created by your buyer, while an invoice is something you produce. It sets out the terms and conditions under which the retailer is wanting to buy from you. And, crucially, once you accept the PO, it is legally binding on both sides. It is effectively a contract, giving you certainty about your buyer’s order.

POs make the terms of the purchase crystal clear

The PO should spell out the terms of your transaction with total clarity so that neither you nor your buyer is in any doubt about what is agreed. It should include basic information, including: the name and address of your customer; the shipping address to which goods should be sent; your details; a PO number; a PO date; a description of the items you are being asked to supply; a quantity; a price per unit; the amount due excluding VAT or sales tax; any tax due; and the total amount due including these taxes. The PO should also include all relevant terms and conditions, including payment terms, setting out when you will get paid—within 30 days of delivery, for example.

POs define the nature of your relationship

In most markets, retailers and other buyers use different types of PO according to how they intend to trade with you. The simplest option is a single-use PO, used when your customer is making a one-off order. You might also receive a planned PO, which looks like a single-use PO, but lacks a delivery date – these are useful for regular orders where the retailer intends to make repeated purchases from you, but not necessarily on a set date. Blanket POs are also common; these commit the retailer to buy regularly over an extended period, perhaps up to a certain value, but with the quantities to be decided over time.

POs make it easier to manage your inventory

Keeping track of stock can be difficult for growing businesses, but POs make life much easier, particularly if you have an integrated IT system (whether it can automate the integration of POs, or you need to manually input the details). This is your opportunity to make sure you always know how much stock you have, how much you will need, and when you’ll need to top up. That is essential to stay on top of orders and keep customers happy without tying up too much capital in being overstocked.

POs keep you on top of your finances

Similarly, by ensuring all PO data is input into your financial management systems, you will have a much clearer idea of your cash flows in the months ahead. You’ll know what money is due to come into the business and when. And you’ll also know when to invoice customers, if required, and when to begin chasing them if payments are overdue. This financial management is crucial—the most successful businesses can still fail if they run into cash flow difficulties.

POs provide a single version of the truth

Your customers’ POs give you a paper trail of the sales you are making (though the paper trail may actually be digital). This should make the accounting and auditing process for your business much more straightforward. And if you’re challenged by the tax authorities or another regulator—international sales, for example, sometimes attract the attention of agencies worried about money laundering—you will find it simple to respond.

In all of the markets in which RangeMe links you to retailers and other buyers, POs are a standard way of doing business. There may be some subtle differences in what the paperwork looks like from one market to another, but a PO should always cover these details.

That said, one difference to keep an eye on is currency. Your international customers will often want to place their orders at a price agreed in the currency that is used in their local market. If this is what you have agreed to, you will need to check POs carefully in order to understand what you are committing to once you convert their order into your own currency. You may need to plan carefully for the effects of exchange rate changes, particularly as your business grows in size.

Hi there 👋
Want the inside scoop on all things CPG?

Get the latest CPG and retail insights, trends, and business best practices sent directly to your inbox, every week.