Purchase Orders

A Purchase Order (PO) is a formal document issued to a vendor authorizing the purchase of specified goods or services at agreed prices. It is a commitment — once confirmed and sent to the vendor, the PO represents an obligation to accept delivery and make payment. In manufacturing, POs are issued daily for raw materials, consumables, spare parts, and outsourced services.

Without POs, purchases happen informally. Materials arrive without prior authorization, prices are not agreed in advance, and there is no baseline against which to verify the vendor's invoice. The PO brings discipline to procurement: it specifies what you are buying, how much, at what price, when you need it, and where it should be delivered.

What You Will Learn

• The purpose and lifecycle of a Purchase Order
• PO statuses: draft, confirmed, partially billed, fully billed, cancelled
• How to create a PO with line items, HSN codes, and tax rates
• How to assign a receiving location
• The PO confirmation workflow
• How to track billed vs. pending quantities
• How to convert a PO to a bill
• Step-by-step: creating and confirming a Purchase Order

Prerequisites

• At least one vendor created in the system (covered in Chapter 26)
• Items (raw materials, consumables, etc.) configured in the item master (covered in Chapter 7)
• Warehouse/location records created (covered in Chapter 9)

Purchase Order Lifecycle

A Purchase Order in Udyamo ERP Lite moves through a defined set of statuses:

Draft  -->  Confirmed  -->  Partially Billed  -->  Fully Billed
                |
                v
            Cancelled

Draft — The PO has been created but not yet finalized. Line items, quantities, and prices can still be edited. Draft POs have no commitment — they are internal working documents.

Confirmed — The PO has been reviewed and confirmed. It is now a formal authorization to purchase. Once confirmed, the PO can be shared with the vendor. A confirmed PO cannot be casually edited — this preserves the integrity of the commitment.

Partially Billed — At least one bill (vendor invoice) has been recorded against this PO, but not all line items have been fully billed. This is common when a vendor delivers and invoices in multiple shipments.

Fully Billed — All line items on the PO have been fully billed. The PO is complete from a financial perspective. No further bills can be created against it.

Cancelled — The PO has been cancelled. Cancellation is only possible before a PO has been billed. Once billing begins, the PO cannot be cancelled — it must be played out through the normal cycle.

PO Line Items

Each Purchase Order contains one or more line items. A line item represents a single item being purchased.

The PO header summarizes the totals:

Tip: Always verify the HSN code on each line item. The HSN code determines the GST rate and appears on the vendor's bill. Mismatched HSN codes between your PO and the vendor's invoice create reconciliation headaches during GST filing.

Receiving Location

Each PO specifies a Receiving Location — the warehouse or location where the goods will be delivered and received. This is critical for multi-location operations where a factory might have a main store, a secondary warehouse, and a shop floor staging area.

When goods are received against the PO, stock is added to the specified receiving location. Selecting the correct location ensures that inventory records reflect where materials physically are.

Creating a Purchase Order

Header Information

Adding Line Items

For each item you are ordering:

1. Select the Item from the item master dropdown.
2. The Description and HSN Code auto-populate from the item record.
3. Enter the Quantity you want to order.
4. Enter the Unit Price agreed with the vendor.
5. Select or verify the Tax Rate.
6. The Tax Amount and Total calculate automatically.
7. Repeat for each item on the order.

The PO totals (subtotal, tax, grand total) update as you add line items.

Confirming a Purchase Order

A draft PO is an internal working document. To formalize it, you must confirm it.

1. Open the PO in draft status.
2. Review all line items, quantities, prices, and the receiving location.
3. Click the Confirm button.
4. The status changes from Draft to Confirmed.

Once confirmed, the PO is ready to be shared with the vendor. Confirmation is a deliberate action — it signals that the purchase has been authorized.

Warning: Review the PO carefully before confirming. While the system does not prevent all edits after confirmation, the purpose of confirmation is to lock down the commitment. Treat it as a final approval step.

Tracking Billed vs. Pending Quantities

As bills are created against a PO, the system tracks the billed quantity for each line item. This enables you to see at a glance how much of the PO has been invoiced and how much is still pending.

For example, a PO for 1,000 kg of MS flat bar:

This tracking is automatic. You do not need to manually update PO quantities when creating bills.

Converting a PO to a Bill

When the vendor's invoice arrives, you can create a bill directly from the PO using the Convert to Bill action. This pre-fills the bill with the PO's vendor, line items, quantities, prices, and tax rates — saving data entry time and ensuring consistency.

1. Open the confirmed PO.
2. Click Convert to Bill.
3. The system creates a new bill pre-populated with the PO data.
4. Adjust quantities if the vendor delivered a partial shipment.
5. Enter the Vendor Bill Number (the reference number on the vendor's physical invoice).
6. Review and save the bill.

The PO's billed quantities update automatically, and the PO status changes to Partially Billed or Fully Billed as appropriate.

Tip: Always use Convert to Bill when a PO exists. Creating a standalone bill when a PO exists breaks the link between the two documents, making three-way matching impossible.

Step-by-Step: Create and Confirm a Purchase Order

Scenario: Your factory needs 200 pieces of 6205-2RS bearings from an SKF dealer for an upcoming production run. The agreed price is Rs. 145 per piece, GST at 18%.

1. Navigate to Purchases > Purchase Orders and click New Purchase Order.
2. Select the vendor: Industrial Bearings Corporation.
3. Set the Order Date to today.
4. Set the Expected Delivery Date to one week from today.
5. Select the Receiving Location: Main Store.
6. Add a line item:
   • Item: Bearing 6205-2RS
   • HSN Code: 8482 (auto-populated)
   • Quantity: 200
   • Unit Price: 145.00
   • Tax Rate: 18%
   • Tax Amount: 5,220.00 (calculated)
   • Total: 34,220.00 (calculated)
7. Verify the PO totals: Subtotal Rs. 29,000.00, Tax Rs. 5,220.00, Total Rs. 34,220.00.
8. Add any notes: Delivery at Gate 2. Contact stores supervisor on arrival.
9. Click Save to create the PO in draft status.
10. Review the PO one final time, then click Confirm.

The PO is now confirmed and can be shared with the vendor via email or print.

Tips & Best Practices

Tip: Use the expected delivery date consistently. Over time, you can compare expected vs. actual delivery dates to measure vendor reliability. This data is invaluable for choosing between vendors for time-sensitive orders.

Tip: When ordering raw materials whose prices fluctuate (steel, copper, chemicals), lock in the price on the PO and confirm promptly. A confirmed PO with an agreed price protects you from subsequent price increases by the vendor.

Warning: Do not leave POs in draft status indefinitely. Draft POs clutter the system and do not trigger any downstream tracking. If a PO is no longer needed, cancel it. If it is needed, confirm it.

Tip: For recurring purchases of the same items from the same vendor, use a previous PO as a reference. While Udyamo ERP Lite does not have a "copy PO" feature, having the previous PO open in another tab while creating the new one speeds up data entry.

Quick Reference