Using purchase orders should be considered if you’re in a business that requires materials to be purchased each month, and you have employees doing the purchasing, receiving and/or bill paying. Also, it's unwise to have the same employee doing the purchasing and the receiving.
Don't tempt anyone to steal from you. When a business grows, sometimes it's hard to keep up with the paperwork and inventory items, and you may not have time to do these things yourself. But it's always wise to have different employees responsible for the buying, the receiving, and the paying.
When you are using purchase orders, anything that is purchased would require a purchase order (PO) and it would require your signature. Or, at least a shop manager's signature. That will stop any unauthorized purchases. If the same person orders parts and receives the parts into the shop, they could buy things and then take them home. Who's going to know? Whoever pays the bills will assume it's a legit bill and pay it.
If you are using POs, the bookkeeper will require a copy of the signed PO with the invoice from the vendor, so if a purchase wasn't authorized, they will question the purchase.
You should keep a copy of each PO with the invoice in your Accounts Payable function, and then keep another copy in a file with your Buyer. This will help them keep track of what they ordered from whom. They might keep the POs in a file by number, or by vendor. If you have the copies, you could keep files by both number and vendor. If you're using a computer system, you will have copies in the system, so you don't need to keep physical paper copies.
That said, if you’re the owner and you do all the buying and
receiving, there’s not much of a reason for using purchase orders. It would just bog you down in more
paperwork. But if you’ve got several
employees involved in the buying/receiving process, it makes good business
sense. They can provide many benefits.
For more details, download my free whitepaper for the correct way to use purchase orders and more of how they can help your business.