Procurement is a core operational function of any business. Without the ability to obtain the necessary materials, a business cannot manufacture its products.
Traditionally, procurement’s most important goal was to lower costs. However, the pace of modern business has accelerated dramatically. Today’s businesses also operate on a global landscape sourcing materials and selling products across the world. That’s forced procurement to become a digital, measurable function aligned with overall corporate priorities.
Procurement, purchasing, and supply chain management – business people tend to use these terms interchangeably. While they are related and are all part of a company’s finance or accounting function, there are differences.
Let’s understand each one and the differences between them in more detail.
Procurement is an essential component of any business. In order to operate effectively and produce its own goods and services, every organization must procure various goods and services from third party vendors.
Purchase requisitions and purchase orders (“POs”) are both key documents in an efficient procurement process for any business. They allow teams to plan purchases adequately, plan budgets, and provide proof of spending in case of financial audits.
People often confuse purchase orders (also known as POs) and invoices or use them interchangeably. In fact, they are two different documents that each serve their own purpose. Both are key elements of the procurement process for any business.
But what’s the difference between the two – and when would you use a PO vs an invoice?