I would like to know the implications of setting up a blanket PO for two to three years? What is a good practice?


Blanket POs should include an expiration date or a dollar limit or both, and ensure that invoices, of course, are matched against the PO's limits. Best practice is to set them up for just 12 months at a time, and review and renew annually as needed.  If you set them up for a longer period, the agreement may outlast the need. Needs change, so a 12 month limit offers benefits while not over-committing. That may depend on the nature of what you are purchasing. Still, 12 months is the general rule.

That being said, while blanket purchase orders benefit organizations by locking in quality and terms, mistakes can compromise the blanket purchase agreement. A common mistake is that buyers in the purchasing department fail to monitor the agreements. If the agreement expires or the maximum dollar amount is exceeded, the supplier may keep shipping items but charging at the general rate rather than at the negotiated PO rate. AP should keep a copy of the blanket PO, and keep track as they match invoices against it. Hopefully you have a good relationship with purchasing; you can send a warning message to them to let them know when the limit is near.

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