Guide to Blanket Purchase Orders

Introduction

In the case of procurement we usually come across scenarios where we are procuring goods/services of low value/importance and this action maybe repeated over a period of time, in this case we make use of Blanket Purchase Orders.

Let me help you with an example, purchase of Maintenance/Office Utility materials/stationery are procured time and again, here we can limit the posting of GR/SES.

Why Blanket Purchase Order ?

1)Blanket PO nullifies the need of Material Master/Service Master/Goods Receipt or Service Entry Sheet posting and it we can make direct invoice posting.

2)As a user, there is provision to maintain a validity period in the Purchase Order.

3)Additionally, we can maintain a “Limit” to put a cap on the total spending.

4)If the validity period expires or the limit is extended, “Invoice will be blocked for Payment” .

How To Work With Blanket Purchase Order ?

1)Create a Purchase Order of type “FO-Framework Order”, Account Assignment Category as “K-Cost Center”, Item category as “B-Limits”.

In case of Limits, the Expected Value is similar to Net Price and Overall Limit is the maximum amount of Invoicing to be allowed for this material/service.

Additionally, we can also maintain Validity Period in the header.

2) Post an Invoice(MIRO)

Here an error message is thrown as the Invoice value exceeds overall limit as amount is greater than the overall limit specified in Purchase Order(Tolerance limits might also comes into the picture).

If we go ahead and try to post the same, it will be blocked for Payment.

Similar action will come into force if the Invoice Date is outside the validity period.

Conclusion

Creation of a new purchase order frequently for procurement of goods of less importance and taking delivery against the order on a recurring basis is frequently considered uneconomical and time consuming, Blanket Orders are here to our rescue.

Now that we have a brief overview of the practice and use of Blanket Orders, we can suggest the same for our business processes as and when required.