How to: create a purchase order

How understanding how to create a purchase order can build stronger client relationships for contractors and suppliers.

Why Freelancers, Contractors and Suppliers Need to Know how to Create a Purchase Order

In the world of freelancing and contracting, where every project counts and every detail matters, having a structured and organised approach to business transactions is essential. An indispensable tool for achieving this is knowing how to create a Purchase Order (PO). This document might seem like a formality, but it holds significant importance. Let’s delve into the five key reasons why purchase orders are crucial in this line of work.

Why a PO System Provides Clear Definition of Scope and Terms

At the heart of every successful project lies a crystal-clear understanding of the scope, terms and expectations. This is where a purchase order comes in. It serves as a written agreement between the freelancer/contractor and the client, outlining all the crucial aspects of the project. It defines the scope of work, the deliverables, the timeline, the cost and any other specific terms that both parties have agreed upon.

By providing this written confirmation, a purchase order reduces the chances of miscommunication and misunderstandings. It provides a reference point to resolve any disputes that might arise during or after the project. Freelancers and contractors can confidently proceed with their work knowing that there’s a tangible document reflecting the project’s scope and terms.

Financial Clarity and Accountability Through POs

Freelancers and contractors often deal with multiple projects for different clients simultaneously. In such a scenario, keeping track of the financial aspect of each project can become challenging. This is where purchase orders play a pivotal role. The document clearly states the agreed-upon cost for the project, the payment terms and any additional expenses that might be involved.

Having this financial transparency is not just beneficial for the freelancer, contractor or supplier. It is also beneficial for the client. It prevents any unexpected financial surprises and ensures that both parties are on the same page regarding the monetary aspects of the project. This accountability establishes trust between the two parties and lays the groundwork for a successful, long-lasting working relationship.

Legal Protection for Both Parties

Freelancers and contractors often operate in a legal grey area, where contracts and agreements might not always be as formal as those in traditional employment settings. This is where purchase orders can act as a shield, providing a certain level of legal protection to both parties involved.

The purchase order serves as documented evidence of the project’s terms and conditions. In case of any disputes or disagreements, it can be presented as proof of the agreed-upon arrangement. This legal footing ensures that freelancers and contractors can safeguard their rights and interests in case things don’t go as planned. It also gives clients confidence that the freelancer/contractor is committed to delivering as per the terms specified.

Streamlined Workflow and Project Management

A chaotic and disorganised project management approach can lead to missed deadlines, incomplete deliverables and overall dissatisfaction from both clients and freelancers/contractors. Purchase orders help streamline the workflow and project management process. Once the terms are laid out in the purchase order, freelancers and contractors can create a structured project plan, allocate resources effectively and ensure timely completion of tasks.

Put simply, the document acts as a roadmap, guiding the freelancer/contractor through the project’s various stages. It can also include milestones and deadlines, allowing both parties to track progress and make adjustments as necessary. This level of organisation not only enhances the overall project quality but also portrays the freelancer/contractor as a professional who takes their work seriously.

Create a Purchase Order Tracker for Record Keeping and Tax Compliance

Maintaining accurate financial records is crucial for proper tax compliance and financial management. Purchase orders contribute to this aspect by providing a documented record of all financial transactions related to a project. This includes not only the agreed-upon cost but also any changes or additional expenses that might occur during the project.

Having a comprehensive financial record through purchase orders simplifies the process of preparing invoices, tracking payments and maintaining an overview of income and expenses. It also helps freelancers and contractors stay organised during the tax year, ensuring that they can accurately report their earnings and deductions.

You can Create a Purchase Order with our easy-to-use Template

Purchase orders, much like invoices, might seem like a formality, but their significance cannot be overstated. By recognising and harnessing the power of purchase orders, freelancers and contractors can elevate their professionalism, build stronger client relationships and set themselves up for long-term success. 

Download your Purchase Order Template Here