If you’re a freelancer, or small or medium business owner, you may have asked yourself, what does FOB mean on an invoice or what is a PO number? Unfamiliar terms can leave you feeling uncertain in your invoicing process, but we’re here to help.
FOB is an acronym for ‘Free on board’ or ‘Freight on board,’ which indicates the moment a business has shipped a product and is no longer liable for the items. This helps both clients and vendors understand the terms and conditions regarding shipments.
A purchase order (PO) number is a unique identifier assigned to each purchase order by the supplier or seller. It tracks the transaction and provides information about purchased items, their cost, and other details related to the order. The PO number is typically found on the invoice that accompanies the shipment of goods or services. If your industry ships parts or products to clients, you will find a spot for this number on any auto invoice template, or templates for industries that ship products.
This code serves as legal proof of purchase in case of payment disputes, should they arise. The number also means buyers can easily match up invoices with items they’ve purchased.
How Is a PO Number Included in Transactions?
When a buyer places an order with a seller, they typically include a PO number on their invoice. The seller then includes this same PO number on their own invoice when sending it back to the buyer. Buyers can track exactly which items were purchased and which invoices need to be paid when dealing with their accounts.
Additionally, if there’s any dispute between the buyer and seller over charges and payment, this PO number can be used in legal proceedings. It serves as an identifier that the buyer agreed to pay for the goods and services as listed, and the business agreed to provide goods and services for those prices.
When would you use progress invoicing with a PO number? PO numbers should be on all invoices to best track documentation of payments received and owed.
What Are the Benefits of Using PO Numbers?
Think of your PO number as a reference code to organize documents for a variety of orders and clients. They streamline accounting processes and ensure accurate record-keeping of all purchases. Always include PO numbers on your invoices to accurately track and organize billing information. Suppliers can verify that invoices are sent without any discrepancies in pricing or products ordered. If errors arise, you will be able to trace the orders easily and identify any issues quickly.
By having an organized system to easily identify orders, your customer service team (or you) can quickly address any questions or concerns a client may have. With a single reference code for each purchase order, businesses can quickly access all relevant information associated with each item or service ordered, including payment terms, delivery dates, or product specifications.
PO Numbers and You
Providing a purchase order number for invoices can make the entire process of payment more efficient while reducing room for error. This system allows both buyers and sellers to easily track each item sold and carry out their transactions transparently.
What’s more, a PO number provides the legal evidence required should any discrepancies arise between buyer and seller surrounding the purchasing of products. If you are looking to maximize your business’s efficiency by reducing the potential for payment processing errors, we advise including PO numbers in your invoices.