7 steps of the purchase order process
1. Order creation
The first step in the PO process is to create a purchase request. At this point, you’ll need to know what is being purchased, the priority level of the requisition, your budget, when the product or service is needed, who needs to approve the order, and the suppliers.
After the order has been created, the next step in the process is to get approval of the requisition. In some cases, this approval may be verbal or sent as an email. In other companies, more formal actions, such as completing paperwork, may be required.
The level of approvals depends on the purchase amount, company policies or guidelines, and the requirements of the supplier. Approvals may also require verification of budget or documentation, such as product specs or detailed statements of work (SOW). After approval, the requisition turns into a PO.
After the requisition is approved, the PO is sent to the selected vendors. The vendors then submit bids based on the POs. The bids are approved based on price, quality, support, service, schedule, and other factors relevant to your business.
4. Binding contract