purchase order - An accounting control vehicle that lets companies control purchases and eliminate fraud.
Without a system for controlling purchases, companies would be subject to a number of abuses.
Without purchase orders for software
(1) Unauthorized people would buy things using the company's resources.
(2) Authorized people would fraudulently cause checks to be sent to their brothers-in-law for nonexistent purchases.
(3) Purchase records would have to be consolidated from multiple sources. PO's allow centralized control of all purchases.
(4) A system would have to be developed to ensure that ordered items had been delivered. Most companies that require PO's also require that the shipper include the PO number on all mailing labels. So, the company's receiving people can track when packages arrive and to whom they should be forwarded.
Purchase orders are a fact of life for microISVs.
Even mom and pop companies use purchase orders.
You can't judge the validity of a PO by it's appearance or by its numbering scheme. Many companies sell 2- and 3-part carbon and carbonless PO's that often result in handwritten, rubber-stamped documents that look like they were created by a 6-year-old. Most popular word processors have built-in templates for creating PO's. Many companies have numbering schemes that include the date, the buyer's initials and a sequential number. So if somebody phones you in mid-June of 2010 with a PO, the number is likely to be 100615S01.
At times, purchase orders may seem like an annoyance, but they're really a blessing. Medium and large companies that generate enough business to justify full-time accounts payable people use purchase orders to ensure that every check that they cut has been authorized by one of their employees. When you present an invoice that references their PO#, they don't have to run around and see if your bill is legitimate. Their PO process has already ensured that it is.
Making purchase orders more effective
Here are a few things that you can do to make the PO process more effective:
(1) If your stock invoice has a place for the customer's PO#, include it. Whether it does or not, include it again in the body of your invoice, above your description of the services that you're billing them for. Include the word "your" in the reference, i.e., "Your PO# 050301." Then, with a magic-marker, highlight their PO# so they could even read it in the dark.
(2) If your customer has a pre-printed PO, it may state the specific person to whom you should send your invoice. Or it may have a title (i.e., Accounts Payable) and a workstation-routing. Send it to these folks.
(3) If the PO doesn't specify who should receive your bill, call your contact and say, "I'm going to mail your invoice. Is there a specific person in your accounting department whom I should send it to, or may I send it to you, and ask that you deliver it to the right person?" I've found that if you just send the invoice to your main contact, s/he may assume, incorrectly, that you've also sent a copy to their payables person, and your invoice may sit in limbo for a month or two.
(4) Since many large companies talk about paying net-30, but actually pay net-90, having a PO# makes it easy to follow up on the status of your invoice.
(5) It's probably a good idea to send back a copy of the PO with your invoice, because the PO undoubtedly has an "authorized signature" on it that the accounts payable people might want to check, especially if the PO is for more than a few dollars. Do keep a copy for yourself. It doesn't have to be an original (a photocopy or a scan will do the trick). That "authorized signature" might be handy if the company decides to disown the charge.
Accept purchase orders for your software
I've heard some software authors say that they won't accept purchase orders! This strikes me as being counter-productive. Most people are honest.
My recommendation would be to accept PO's. In 25+ years, I doubt I've gotten 6 bad PO's. And if you're selling a business-to-business product, you have to accept PO's or you're going to be out-of-business. Welcoming purchase orders is good software marketing.
"Purple Cow - Transform Your Business by Being Remarkable" - A book by Seth Godin.
Cows are boring, Godin tells us. That, of course isn't true. Purple cows, Godin continues, are remarkable. That's hard to dispute.
"Purple Cow" is all about making your software business remarkable. Godin believes that you have to be remarkable, or your business is going to fail. Remarkable software marketing means building things worth noticing right into your applications. You won't be remarkable if you create a me-too product, and attempt to sell it with an unusual marketing or sales campaign.
I reviewed "Purple Cow" in Al Harberg's Software Marketing Newsletter. Please read the entire book review.
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