What is an open purchase order report?

Definition

An open purchase order report is the list of purchase orders that still have goods or services outstanding. In the books, it is a tracking list, not a Balance Sheet account.

Each row is an order that has not been fully received, fully billed, or both. The report tells you what the business already promised to buy, before those amounts become payables.

Where it shows up

Balance sheet: Related to nothing sitting as an account until goods arrive or a bill is recorded.

P&L: Related to nothing extra.

Cash flow: Related to cash that will leave later when those orders are billed and paid.

See also: Purchase Order · Goods Receipt · Accrual Cutoff

When you look at the Balance Sheet, you will not find an open purchase order line. Inventory and accounts payable appear only after goods arrive or a vendor bill is recorded.

A long open list can mean orders are delayed, or that receiving has not been entered. A short list can mean orders are filling quickly, or that the business is buying little.

The Income Statement does not move because you printed this report. Expense waits until the goods are received or the bill is recorded.

Cash on the Statement of Cash Flows will leave later, when those orders turn into bills and those bills are paid. The report is a preview of that later cash, not the cash event itself.

How it works

Someone issues a purchase order for a quantity and a price. That order stays open until the remaining quantity is received or the remaining amount is billed.

How an open purchase order report usually works:

• List purchase orders that still have quantity or amount outstanding
• Reduce open quantity when a goods receipt posts
• Reduce open amount when a matched vendor bill posts
• Drop rows that are fully received and billed
• Use the remaining total as the purchase commitments still open

A goods receipt reduces the open quantity. If 400 loaves were ordered and 250 arrive, 150 stay open on the report.

A vendor bill can also close part of the order when the system matches the bill to the remaining quantity. Full receipt and full billing take the order off the list.

Typical columns are vendor, order number, order date, original quantity or amount, received quantity, billed amount, and the open remainder. Buyers use those columns to see what is still expected.

The report is not a journal. Printing it does not debit inventory or credit payables; it only lists commitments that are not yet on the statements.

At period-end, a long open list is a cutoff clue. Goods may have arrived without a receipt, or a bill may be sitting unrecorded, and those items need a separate accrual.

The report also helps a cash forecast. Open orders are amounts that will likely become payables, then cash, even though they are not payables yet.

Example

A cafe lists bakery orders that have not fully arrived. One purchase order is for $1,200 of bread, and only half the loaves have shown up.

The open purchase order report shows $600 still outstanding on that order. The received $600 is no longer open.

If the missing loaves arrive tomorrow, a goods receipt will clear the rest of the row. If they never arrive, the cafe should close or cancel the remaining $600 so the report does not keep promising bread that is not coming.

No extra journal is posted for listing the open order. The later receipt or bill is what hits the books.

Common mix-ups

An open purchase order report is not an open payables report. Open purchase orders are promises to buy, and open payables are vendor bills already on the books.

People also treat an open order as if it were already inventory. Inventory is recorded when goods arrive, not when the order is printed.

Another mix-up is leaving filled orders on the report. Once the quantity is received and billed, the row should drop off so a stale line does not make the business look more committed than it is.

Related terms

• Purchase Order: The document authorizing a purchase from a vendor at agreed terms.
• Goods Receipt: The record confirming that ordered goods actually arrived.
• Accrual Cutoff: The period-end sweep to capture unbilled expenses in the period they belong to.
• Vendor Bill: The invoice a supplier sends that becomes a payable.
• Commitments: Amounts the business has agreed to spend but has not yet recorded as expense.
• Budget Versus Actual: The comparison of planned amounts to what actually happened.
• Inventory: Goods held for sale or used to produce goods for sale.
• Cash Flow Forecast: A forward projection of cash receipts and payments.