The purchasing process involvesmany papers,documents, andbills that one caneasily get lost in the shuffle.It is important, as both buyers and sellersunderstand the purpose of these documents sopurchases can run smoothly.
In this post, we will look at some of the most common commercial documentsyoumight come acrossduring the purchasing process:
- Purchase Order
- Invoice
- Packing Slips
Table of Contents
Purchase Order
A purchaseorder will be the first major documentin the purchasing process. It is an order issued by a buyer to a seller requesting the purchase of goods or services. The purchaseorder includes severalcrucial detailslike type of goods or services, quantity, price etc.In simple terms, a purchase orderstateswhat a buyer wants and how much to be included in the order. Italsooutlines the payment terms and purchase agreement between the two parties.Purchaseorders have made it easierfor businessesto track inventory and payments, making the purchasingprocess more efficient. Itadditionallyallows businessesto keep a detailed record of all their transactions.
There are several steps involved in issuing a purchase order.
- Selecting the goods that need to be purchased and draftingthepurchase orderto send to the seller. The buyeridentifies the product or service along with the quantitytheyneedand creates a draft with this information.The draftalso includesinformation such asthedate of the order, FOB shipping information, discount terms, names of the buyer and seller, description of the goods being purchased, item number, price, quantity, and the PO number.
- Once the seller receives the purchase order draft,theywill review the request and checktheirinventory for the availability of the required goods.The seller has the right to accept or reject the order. Upon acceptance, the authorized manager will sign off on the document, legally binding the two parties into an agreement.
- Once the purchase order has been placed and signed, the buyer will receive an approved copy of the order. At this stage,the PO becomes an open purchase order,signifying thattheorder isplacedand delivery of the goods is pending.
When drafting a purchase order, it is important to include certain information and format the document correctly to ensure clear communication with the seller.It should have:
- Buyerand vendorinformation(company name, address,etc.)
- Order dateandordernumber
- Shipping address – where the order should be delivered to
- Orderdetails:
- requested items
- SKU number
- quantity required of each item
- unitprice
- Shipping terms:
- F.O.B(Free on Board):indicateswhen liability and ownership of goods is transferred from a seller to a buyer.Under F.O.B. shipping point, the ownership of goodstransferto the buyer at the shipping point.Thus, the seller is not responsible for the goods during transit. Under F.O.B.destinationhowever, the ownership of goods lies withthe seller during transit and is transferred once it arrives at the buyer’s port.
- F.A.S(Free Alongside Ship):Under F.A.S. terms, theseller clears goods for export and places them alongside the vessel at the named port of departure. Here,the sellerassumes responsibility for all expenses until freight is on the vessel, thenthe buyertakes over.
- C.I.F.(Cost, Insurance, and Freight):Under CIF terms, the selleris responsiblefortheexpensesto cover the costs, insurance, and freight of a buyer’s order while it is in transit.
- C.P.T. (Carriage Paid To): The C.P.T. rule requires the sellerdeliversthe goods at their expense to a carrier or another person nominated by the seller. The seller assumes all risks, including loss, until the goods are in the care of the nominated party.
Pictured above: Blank example of a Purchase Order.
For more purchase order templates you can visit the following sites:
Types of Purchase Orders
There are fourdistinct typesof purchase orders based on how much information is included in them. They are:
- Standard Purchase Orders
This isthe most commontypeof purchase orders.StandardPOsclearlydefinesthe details of the purchase. This can include outliningwhichitem/service is being purchased, its quantity, delivery date and payment terms. - Planned Purchase Orders
A buyer places a planned purchase order based on the future needs of his business. In this case,aPOspecifies detailsjust like a standard purchase order.What is unique is that the quantity needed is an estimated guess and the delivery date can be tentative. - Blanket Purchase Orders
A blanket purchase order is placed when the buyer is looking tomake multiple orders at once. It allows the buyers to negotiate a discounted price for the bulk purchase. - Contract Purchase OrderThis is the most formal type of purchase order. Here, the buyer and seller sign a legal contractsummarizingthe purchase details before any purchase order is issued.Contract POsprovide
Invoice
Aninvoiceis a commercial document that serves as a record ofsalebetween two parties.Itverifiesthe payment terms agreed between the buyer and seller and is non-negotiable.Simply put, aninvoiceis a seller asking the buyer to pay for the goodstheypurchased.
Invoicesshouldindicate:
- Purchase order number
- Purchaser andVendorinformation
- Items sold
- Shipment date
- Unit price
- Payment terms
- Tax deductions
- Discounts (if any)
- Additionaldetails about the shipment.
Pictured above: Blank example of an Invoice.
You can findmanyfree invoice templates online.Here are a few sites you can use:
The difference between a Purchase Order and an Invoice
The purchase order andinvoiceare two particularly important sales documents, but they should not be confused with each other, as they both serve different purposes.The purchase order is the request from a buyer topurchasegoods or services from a business and it is issued before theinvoice.Aninvoiceis more like a reminder to make payment for the goods or services used, issued by the seller to the buyer.The purchase order puts forwards the terms for the purchase requested by the buyer. Once accepted by the seller, aninvoiceis issued confirming those terms. Thus, theinvoiceis the document that comes after the purchase order. All the technical details about the purchase that are included in a purchase order may not befound in aninvoice. Rather, aninvoicepresents the summarized termsof the purchase.
Packing Slips
A packing slip is a document thatcontainsthe list of all items included in a package or shipment.They can also be known as a waybill, packing list or shipping list. This document breaks down product details into a list that helps the purchaser cross-check items in the shipment with what they ordered.It consists of all necessary information about the item liketheweights, dimensions,number of cartons, its packing sizes, the total quantity of each product, etc.Itmayalso contain additional information, such as the name and address of the recipient, the amount paid/due, extra charges, and a packing slip number.
In comparison to brick-and-mortar stores, eCommerce shoppingcomewith a lot of unique steps and complications.Becausethe purchasing process all occurs online, packing slips helpprovideclarity and transparency to your customers.Many brands include packing slips with their orders for the followingreasons:
- Ensuresthatthe right items are being shipped
A packing slip is a record of allphysicalitems in a package. Packing slips helpsellers verify that they ship the correct items as per their customers’ orders. It provides sellers with an accurate count of the items being shipped.It canalsobe used as a check during the quality control phase of order fulfillment tominimize discrepancies andensure that the right itemsintherightquantities areshipped out. - Identify lost or damaged goods
Packing slips serve as evidence of productsThus,in case of any accident during shipment, packing slipshelpsinitiatethe refund or product replacement process. - Helps customersverify the products
Once the package is delivered, the customer can crosscheck the items in the package with the help of the packing slip. It helps customers identify any problem with their package and notify the seller if an item has beendamagedorwrongly delivered. - Smoothens the purchasing process
Highlighting all the points above, a packing slip simply makes it easier for buyers and sellers to complete the purchasing process without any hassles.With the packing slip, the seller ensures that the right products aredispatched,the shipment team can verify the package and the buyer can cross-check his order. Overall, it organizes the purchasing process and strengthens business relations between the buyers and sellers.
As previously established, packing slips are crucial when fulfilling eCommerce orders because theycontainnecessary information for each stakeholder in thetransaction.There will be obvious differences in the exact details each packing slip holds but they all havehom*ogeneityin their composition.All packing slips include important common labels like:
- Company Information
- Name
- Logo
- Contact Information
- Order number and date
- Recipient information
- Name
- Shipping address
- Billing address (if different from shipping address)
- Product Number (SKUs orUPCs)
- Product description
- Order quantity and Shipping Quantity
- Notes (if any)
Reach out to Fulfyld today and we can either help arrange your international shipment or provide you with a commercial packing list template to make your life easier!
Pictured above: Blank example of a Packing Slip.
The above example of a packingsliphas all the necessary informationrequired. You can always use packing slip templates and customize themto the needs of yourbusiness.You can use to following sites to find free packing slip templates:
How isa Packing Slipdifferent from an Invoice?
Thereisoftenconfusionbetween the similarity of packing slips andinvoices, but they are not the same.The two slips serve different purposes entirely despite looking similar, which we will clarify in this section.
A packing slip is the list of physical goodspurchasedand shipped,whereasaninvoiceis the payment order for the purchase made.Packing slips are used to cross-check the items in the package with the purchase order and keep track of the items in case they are lost or damaged.Aninvoiceis a document to make the customer aware of the paymentneeding to be completedfor the goods theypurchased.
A packing slip is important not just for the seller and buyer,but also for the shipment company toaccuratelykeep track of the products they are carrying. Aninvoice,however, has no such relevance for the shipping company. It is sent directly to thecustomerasthe shipping company is not interested in knowing the prices of the products.The packing slip ismeantfor the shipping company and the warehousing team to record the incoming goods. Aninvoicegoes to the accounting department or the person responsible for making the payment.
It is also important to note that a packing slip is onlyrequiredwhen the transaction involvestheshipment of physical goods. Service-based businesses, thus, do not need to issuepacking slips. However, all businessesmustissue invoices as it is a record of the financial transaction.
Each of these documentsareessential inensuringsmoothtransition ofgoodfrom seller to buyer. Here atFulfyld,we offer packing slips into each order, with logo customization andprovisions for unique fields as per your business’s needs. Contact us now for more information!
