Importance of the Terms of “Delivery and Payment” in the Purchasing Order

Topics: Contract, Procurement, Supply chain management terms Pages: 5 (1757 words) Published: December 2, 2011
How important about the terms of “Delivery and Payment” in the Purchasing Order? Describe the complete purchasing flow about delivery and payment. Supposing the emergence of delivery problem, any possible remedies can be done?


“Delivery and Payment” are important in the purchasing order. Since they reflect the place, time, ordered quantity and installment of delivery, end up related to the payment until the completion of purchasing process.


Purchasing is the formal process of buying goods and services. The Purchasing Process can vary from one organization to another, but there are some common key elements. The process usually starts with a 'Demand' or requirements – this could be for a physical part (inventory) or a service. A requisition is generated, which details the requirements (in some cases providing a requirements speciation) which actions the procurement department. A Request for Proposal (RFP) or Request for Quotation (RFQ) is then raised. Suppliers send their quotations in response to the RFQ, and a review is undertaken where the best offer (typically based on price, availability and quality) is given the purchase order. Purchasing Process includes as usual 8 main stages as follows: 1. Requisitioning

2. Approving
3. Studying Market
4. Making Purchase Decision
5. Placing Purchase Orders
6. Receipting Goods and Services Received
7. Accounting Goods and Services
8. Receiving Invoices and Making Payment
9. Debit note in case of material defect

A purchase order is a written authorization requesting a vendor to furnish goods to a purchaser. It is an offer from the purchaser to buy certain articles and is indicating types, quantities, and agreed prices for products or services the seller will provide to the buyer. Sending a PO to a supplier constitutes a legal offer to buy products or services. The offer is accepted by the seller when she supplies the requested items. A contract is formed and the seller can expect payment in return for the delivered goods. It documents and communicates the transaction specifications. Finally, the numbered form also serves as documentation for invoice processing, and as an auditable source document supporting the incurred financial liability. Purchase orders (PO) can be of various types, including:

• Standard - a one time buy;
• Planned - an agreement on a specific item at an approximate date; and • Blanket - an agreement on specific terms and conditions: date and quantity and amount are not specified. Purchase Orders are normally accompanied by Terms and Conditions which form the contractual agreement of the Transaction. The Supplier then delivers the products/service and the customer records the delivery (in some cases this goes through a Goods Inspection Process. An invoice is sent by the supplier which is cross-checked with the Purchase Order and Document which specifying that the goods received. The payment is made and transferred. Delivery is the process of transporting goods as last few purchasing process. Most goods are delivered through a transportation network. Cargo (physical goods) are primarily delivered via roads and railroads on land, shipping lanes on the sea and airline networks in the air. Certain specialized goods may be delivered via other networks, such as pipelines for liquid goods, power grids for electrical power and computer networks such as the Internet or broadcast networks for electronic information. The general process of delivering goods is known as distribution. The study of effective processes for delivery and disposition of goods and personnel is called Logistics. Firms that specialize in delivering commercial goods from point of production or storage to point of sale are generally known as distributors, while those that specialize in the delivery of goods from point of sale to the consumer are known as delivery services. Postal, courier, and relocation services also...
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