I see a lot of small companies buying in China without a purchase order (PO). They simply accept the pro-forma invoice from the supplier. I think this is dangerous. It shouts “inexperienced buyer” to the supplier. But that’s not the main problem.
If you write the PO, you control what goes inside the PO. You can write all the information that is important to you, and refer to other documents that must be complied with by the supplier.
What is the minimum to write in a PO?
- Buyer identification, with either the logo or the company name in large characters.
- Full contact information of the person who follows the order in the buying organization
- Full supplier company information
- PO (unique) number, PO date, corresponding PO number of your customer if any.
- List of the products with ordered quantity, unit price, and total price.
- Most important specifications of each product (do not forget about labeling and packing). If you have written a product checklist, refer to it on the PO.
- Terms of purchase: currency, incoterm, loading port and receiving port (for sea shipments), shipment date promised by supplier, payment terms, penalty for late shipment. If you have a quality control plan, refer to it on the PO.
You don’t have a PO form?
No problem. Feel free to download this PO template and adapt it to your needs.
Is the PO a contract?
No. If you want a contract that can be enforced in China, you need to work with a lawyer who specializes in China business.
I have no qualification to write about this, so here is an extract from an article on the China Law Blog:
Small and medium sized businesses often enter into OEM manufacturing transactions with a simple purchase order. This is a mistake. The purchase order will protect the Chinese manufacturer, not you. Your protection depends on your securing a written OEM manufacturing agreement with each Chinese manufacturer with which you deal.
What do you think?