How do I accept Purchase Orders? How about if I am a sole proprietor?

Question

I have a small business that supplies wholesale promotional items. I am talking to a few schools right now that prefer to purchase promotional items from me through purchase orders. I am unfamiliar with these and I have been accepting credit cards and checks eversince.

What is the process of accepting a purchase order?

Also, a follow-up question, but how do I deal with it as being a sole proprietor? The business is home-based and all done online. Does the name on the PO have to be my full name? How do I deal with taxes on my end, since its just a small business? When using purchase orders, will it reach the IRS?

Answer 1

These buyers are basically asking for "credit terms of sale", which is how the majority of business is done in the USA. But, seller beware! At the very least, you had better put together a credit application for your business. AND, you need to make sure of who you are selling to in order to realize the eventual payment for the products you are selling. (In other words, some buyers never pay, or don't pay when they should). For more information on managing purchase orders and extending credit to customers, visit this website for info...

http://www.CreditManagementWorld.com

You will also need to track your sales in a sales journal and be able to mail invoices to your customers; tracking receipt of payment as you go along.

As far as being a sole proprietor, the people you are selling to will probably ask you to complete a standard form W-9 that states either the business EIN number, or in your case, your social security number. This is just a record for them to provide to the IRS (should the IRS ever ask) to show who received compensation for the products they bought.

I am NOT going to give tax advice here, but don't overburden yourself with worries about your fledgling, sole-proprietorship, home-based business. Just keep a simple spreadsheet or get some cheap accounting software and track your costs and your sales revenue and you will do fine. The IRS has bigger fish to fry when it comes to looking at small business revenue and the taxes they pay. But, I wish you luck! Hopefully your business will grow and you will find it necessary to start to worry about things like forming an S Corp. or LLC. Good luck!

Answer 2

Being a Sole Proprietor has no bearing on whether or not you accept purchase orders or not.

To accept a purchase order:

*Find out in advance who is authorized to order

*Make sure that the price that they list on the purchase order is the price that you want to sell the item for.

*Use the purchase order to place the order for your customer

*You can still collect the money in advance for the items purchased. Just have that as your selling terms (terms of agreement)

FOLLOW UP QUESTIONS:

Your customer sends you a purchase order with your name and their name on it. It is basically an agreement of items to order and the price they will be charged. The purchase orders are not sent to the IRS. The IRS is interested in the money you collect and since this is only an order, it is not recorded.

Answer 3

New.
A PO is a template, for a transaction. You need a list of authorized signers., time frame for payment, and other conditions.
You bill them for their order, refer to the PO number in the bill.
It's only a method for connecting orders, to bills, to goods.

Tax wise it's the same as cash, in nominal amounts.