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Understanding Purchase Orders

This guide explains how to use Purchase Orders (POs) to buy goods and services for your business. Whether you are a procurement manager or a business owner, this guide will help you manage your spending and ensure you get what you pay for.

What is a Purchase Order?

Think of a Purchase Order (PO) as a formal contract between you and your supplier. It’s not just a shopping list; it’s a promise that says: "If you send me these items at this price, I promise to pay you."

Why use Purchase Orders instead of just calling the vendor?

  1. Legal Protection: It serves as proof of what was agreed upon (price, quantity, delivery date).
  2. Budget Control: You can approve spending before the money leaves the bank.
  3. Accuracy: It ensures the warehouse team knows exactly what to expect.

💡 Analogy: If a Sales Quote is a menu you give to a customer, a Purchase Order is the order you place with the chef.

The Procurement Workflow

In Kezi ERP, buying things follows a logical path to keep everything organized.

1. Request for Quotation (RFQ) 📝

Before you buy, you might want to compare prices. You create an RFQ and send it to one or more vendors to ask: "How much for 100 laptops?"

  • Status: Draft / Sent
  • Action: You enter the products you want.

2. Confirmed Purchase Order ✅

Once you agree on the price, you confirm the RFQ. It now becomes a Purchase Order.

  • Status: Purchase Order
  • Action: The system locks the price and quantity so they can't be accidentally changed.

3. Receive Products 📦

When the truck arrives, your warehouse team checks the goods against the PO.

  • Action: Create a Receipt.
  • Result: Your inventory stock goes UP.

4. Vendor Bill 🧾

The supplier sends you an invoice (Bill) for payment.

  • Action: Create a Bill linked to the PO.
  • Result: You pay the vendor.

The Magic of 3-Way Matching

One of the most powerful features of using Purchase Orders is 3-Way Matching. It prevents fraud and mistakes.

The Concept: The system checks that these three documents match exactly:

  1. The Purchase Order: What you ordered (e.g., 10 chairs at $50).
  2. The Receipt: What you received (e.g., 10 chairs).
  3. The Vendor Bill: What you are asked to pay (e.g., $500).

If they match: You pay the bill. If they don't match: The system alerts you (e.g., if the bill is for 12 chairs but you only received 10).

graph TD A[Purchase Order] -->|Matches?| B(3-Way Match) C[Goods Receipt] -->|Matches?| B D[Vendor Bill] -->|Matches?| B B -->|Yes| E[Approve Payment ✅] B -->|No| F[Flag for Review ❌]

How to Create a Purchase Order

Step 1: Start an RFQ

Navigate to: Purchase → Requests for Quotation → Create

  1. Vendor: Choose who you are buying from.
  2. Order Date: Today's date (automatic).
  3. Product Lines: Add the items you need.

Step 2: Send to Vendor (Optional)

You can email the RFQ directly from the system to ask for confirmation.

Step 3: Confirm the Order

Click Confirm Order.

  • The status changes from RFQ to Purchase Order.
  • A Receipt transfer is automatically created for your warehouse to expect the goods.

Step 4: Receive Goods

When items arrive, click the Receive Products button (smart button at the top). validate that you received the correct quantity.

Step 5: Create Bill

Once you receive the bill from the vendor, click Create Bill on the PO. The system will auto-fill the lines based on what you ordered/received.

Troubleshooting

Q: Why is my Purchase Order locked?

A: Once a PO is Confirmed, it is locked to prevent changes that would mismatch with the warehouse receipt. If you need to change it:

  1. Unlock the PO (if you have permission).
  2. Or, Cancel it and create a new one.

Q: How do I cancel an order?

A: If the order hasn't been received yet, click Cancel. If you have already received the goods, you must first return the goods (Inventory Return) before you can cancel the PO.

Q: Can I receive products in partial shipments?

A: Yes! If you ordered 100 items but only 50 arrived, validate the receipt for 50. The system will create a Backorder for the remaining 50.

Best Practices

  • Always Confirm: Don't leave orders in RFQ status if you expect delivery. The warehouse won't know it's coming!
  • Check Bills: Always create bills from the PO, not from scratch. This links them together for the 3-Way Match.
  • Monitor Dates: specific the "Expected Arrival" date so your team knows when to clear space in the warehouse.