About

Purchase Orders (POs) are how you tell Finaloop what inventory you bought, what it cost, and when it's arriving. Keeping them accurate is what lets Finaloop calculate the true landed cost of every unit — and, from there, your inventory value, COGS, and margins.

Most businesses will only use Regular POs, which you create for each order placed with your vendor. This article covers how to create and manage these Purchase Orders. Some businesses may also see a Dropshipping PO tab, which Finaloop creates automatically, if relevant for your business.

POs are the first step in your Supply Chain flow. See Managing Your Supply Chain to learn more.

1. Why POs are important for your COGS

A PO captures the full landed cost of your inventory — not just what you paid the vendor, but everything it took to get the goods on your shelf.

The landed cost tells you the exact cost each unit of a given SKU cost you.

Landed cost = (direct inventory costs + indirect costs) ÷ number of units

Here’s an example.

You purchase 100 units of Product A $2,000
Shipping and other indirect costs for those inventory items $500

The landed cost per unit is (2000+500)/100 $25

These costs may include:

Cost	Included in landed cost
Product cost	✓
Freight and shipping-in	✓
Duties and taxes	✓
Customs fees	✓
Insurance	✓
Vendor fees	✓
Production costs	✓
Discounts	✓
Vendor credits	✓
Shipping-out costs	X

Finaloop combines these costs to calculate the landed cost of each unit.

That landed cost is then used to:

Value your inventory
Calculate FIFO Cost of Goods Sold (COGS)
Measure product profitability and margins
Produce accurate financial statements

The more complete your purchase orders are, the more accurate your inventory valuation and financial reporting will be.

For more on landed costs, head over to How do I calculate my landed cost?

2. How Purchase Orders connect to the Supply Chain

Inventory typically moves through the following workflow:

After the inventory is received, it’s available for sales, assembly, or transfer to another warehouse.

Each stage serves a different purpose.

Stage	Purpose
Purchase Order	Records what you ordered from your vendor.
Shipment	Tracks inventory while it's being transported and captures shipping-related costs.
Receipt	Confirms what actually arrived and makes inventory available for sale, assembly, or transfer.

A PO is the first step in your Supply Chain process.

3. The Purchase Orders page

Go to Inventory →Supply Chain→ Purchases.

After you create a PO, this screen shows all POs, with summary data for POs at different statuses. Of course, the numbers change when you apply filters by period, status, and/or vendor.

From this page you can:

Create and manage purchase orders
Track fulfillment and payment status
Review landed costs of each PO
Export POs or email them to vendors
Review dropshipping purchase orders that were automatically created by our system

The screen has three sections.

Filters and actions (#1)

Narrow the list by time period, dates, vendor, warehouse, product, amount, payment status; PO shipment group, Shipment, Receipt, or PO number. Toggle historical POs to include these in your search.

You can also:

Export to a CSV / Google Sheets
Import a CSV for one PO or multiple POs at once
Add a Purchase order.

PO totals (#2)

A summary of your POs by status: Draft, Placed, Partially in-process, In-process, Partially in-transit, In-transit, Partially received, Received.

PO details (#3)

One row per PO, showing vendor, dates, total landed cost, line items, total items, received status, whether the PO was sent to the vendor, and payment status. Click any row to open it or toggle more details to see any PO broken down by status.

4. Create regular Purchase Orders (POs)

To create a PO to send to a vendor, we’ll work through the PO process, step by step but first here are some important terms to understand:

Inventory PO terms

Inventory direct costs

Inventory direct costs include costs directly related to the purchase or production of the actual inventory unit.

For resellers, this means the cost of the finished products you are purchasing from your vendor. For brands producing their own products, it includes raw materials and production costs.

Inventory indirect costs

Indirect costs include any additional costs incurred to get the inventory to your warehouse that are not related to the direct costs of the items themselves. Here’s the list of indirect cost types / categories:

Other inventory indirect costs / general
Shipping
Vendor fees
Duties and tax
Custom fees and services
Insurance
Allocated production costs
Pallet costs
Shipping surcharge
Vendor discounts

Note that if you have indirect costs that you don’t think should be reflected in your books as inventory costs, then you can reclassify them as ‘incidentals’. This removes the costs from inventory and moves them to COGS in your P&L. These won’t be included in calculating your landed costs per unit. For more on incidentals, head over to the article Reporting purchases as incidentals.

Landed cost

The landed cost tells you the exact cost each unit of a given SKU cost you. For each inventory item (SKU), the landed cost is the direct cost of inventory items purchased + indirect costs for those items / number of inventory items.

Here’s an example.

You purchase 100 units of Product A $2,000
Shipping and other indirect costs for those inventory items $500

The landed cost per unit is (2000+500)/100 $25

For more on landed costs, head over to How do I calculate my landed cost?

Creating a PO in Finaloop

How to create a PO

Navigate to Inventory>Supply Chain>Purchase orders tab and click the +Purchase order button (top right). This opens the PO screen.
Complete these details:
1. PO name (#1): Name the PO by adding a number or title.
2. Placed date (#2): Enter the date you send the PO to the vendor (pending production). This date doesn’t have any impact on your books.
3. Production started date (#3): Enter the date the vendor confirms the PO. This is the date the items show as Inventory in process in the Balance Sheet, unless you select the Shipment date to be the recognition date in your Supply Chain preferences. From that date, you have an obligation to pay your vendor for the order regardless of whether you've received the goods or an actual bill. From that date, you have an obligation to pay your vendor for the order regardless of whether you've received the goods or an actual bill.
4. Vendor name (#4): You can enter text in the box to find the vendor. You can also add more vendor details, like address, contact details, payment terms, etc.
5. Customer details (#5): You can edit any of your company details here. Appears on the PO file when you export or send it, so your vendor receives a complete, professional document. To add your company logo, go to Preferences and upload your logo.
6. Items (#6): Click the Add items button to open the Add items pane. The screen shows a list of the SKUs that we synced from Shopify and Amazon.
7. If you are ordering inventory that isn’t in the list, for example, raw materials, click + to create a new product.
8. Select the items from the list and enter the quantity. Then click Add.
Now that your PO is updated with the specific items, add the direct costs for each item/unit. Finaloop remembers unit costs by vendor. Once you've entered a product's cost for a vendor, that cost is automatically suggested the next time you purchase the same product from that vendor.
Scroll down and enter any shipping costs related directly to the PO. You can also choose to enter this when creating a Shipment.
To enter additional indirect costs, click + Indirect cost. A Select cost type dropdown opens to select the type of indirect cost.
1. Enter the value of the indirect cost. Repeat to add more indirect costs.
2. Finaloop does the hard work for you and automatically allocates the indirect costs per unit based on the direct costs and calculates the landed cost for each product. The landed cost is the direct cost per unit + shipping and other indirect costs per unit.
3. If you don’t want Finaloop to apportion indirect costs automatically, you can allocate them manually. Click the Calculator icon and set the Auto allocation toggle to OFF (ON by default). With auto-allocation OFF, you can allocate the indirect costs by another method such as, by weight or volume, just enter the allocation numbers next to each item.
Next add a Discount (optional): If there’s a discount, click +Discount and add it.
If you want to add a vendor credit, check out this article on bill credits.
The summary section of the PO will look something like this.
Additional details (optional): Add an attachment or a note, such as special instructions. Both are visible to the vendor.
When you’ve reviewed the details, click Save.

That’s it. The PO is complete. Click Download (top right) to download the file to a pdf or email it directly to the vendor. You can see all the email details and history in the history log.

Creating historical POs

If you have inventory that is in transit or in process on your start date of using InventoryIQ, you'll need to add these as POs and mark them with the relevant status.

Historical purchase orders let you reconstruct the state of your supply chain as of your InventoryIQ start date without affecting prior accounting periods.

When you add a PO with a production date before your start date in Finaloop, you'll see the small Historical PO shield (see image). This created an opening balance for your in process and in transit inventory.

Once the related inventory is received, Finaloop will continue tracking it normally.

Edit PO items or quantities

For any open year in Finaloop, POs are living documents, and you can edit them no matter their status. Any changes you make to the quantities or costs in the POs automatically update your landed costs and, ultimately, your COGS and inventory numbers.

To edit POs, just open the relevant PO, make the required changes, then click Save.

5. Update the PO status

As your order progresses, update its status so Finaloop tracks inventory in the right stage.

Status	Explanation	Accounting impact
Draft	The purchase order has been created but not yet sent to the vendor.	No accounting impact
Placed	The purchase order has been sent to the vendor but has not yet been accepted.	No accounting impact
In-process (Production started)	The vendor has accepted the order and production has begun.	Inventory in Process (Balance Sheet)*
Partially in-transit/ In-transit (Shipped)	Some or all items have been shipped.	Inventory in Transit (Balance Sheet)*
Partially received/ Received	Some or all items have arrived at your warehouse.	Inventory (Balance Sheet)

*You can choose when inventory is recorded in your books (Production Started or Shipment Date) from the Preferences tab.

Finaloop automatically updates your inventory valuation as the purchase order moves through each stage.

Update the PO status to In-process

Click into the PO you want to update.

When the vendor confirms that the order is in progress, open the PO and enter the Production started date (#3 in the image at the top of the page).

This moves PO status to ‘In-process’ and the PO value shows in the Balance Sheet.

Note: You can choose to record inventory in your books on the Shipment Date instead of Production started date. Go to Preferences to change the treatment.

Update the PO to 'in-transit' or 'received'

Add a shipment to record when a shipment has been sent and mark it as received when the shipment arrives in your warehouse.

Here’s how it works:

When your supplier ships the goods, in the PO, add a PO Shipping Group, which represents the items from a Purchase Order that are being shipped together.

For each PO Shipment Group, you can:

Link it to an existing Shipment, or
Create a new Shipment

This flexibility allows you to model real-world purchasing scenarios:

A single Purchase Order can be fulfilled across multiple Shipments.
A single Shipment can contain items from multiple Purchase Orders.

Any changes you make from the PO automatically appear on the Shipments page. You can also create a new Shipment from the Shipments page and link it to PO shipment groups from there.

When a Shipment is marked as Received, Finaloop automatically:

Creates a Receipt
Updates the related Purchase Order status
Moves inventory to the next stage of the Supply Chain

To learn more: See Managing shipping & receipts or Managing your Supply Chain in Finaloop.

6. Dropshipping POs

If your business dropships, your supplier ships orders directly to your customers instead of into your warehouse. In this case, there are two methods we use to handle the COGS for your dropshipping orders. Based on the answers you provided us during onboarding with InventoryIQ, we set the best method for your specific business.

Check out this article to learn more about our InventoryIQ dropshipping methods and about how dropshipping POs work.

7. Vendor balances and payment status

Every purchase order automatically contributes to your vendor's running balance.

As you create purchase orders, record payments, apply credits, or receive inventory, Finaloop continuously updates the amount you owe each vendor.

This gives you an up-to-date view of outstanding vendor balances without requiring manual reconciliation.

Each PO shows a payment status — Paid, Partially paid, or Unpaid. The PO payable summary at the bottom of the PO shows how much of the total is linked to actual payments. Click the vendor there to link a payment (the same linking is available from the vendor's page). The status and totals update automatically as payments are linked.

8. FAQs

Can I edit a purchase order after sending it to the vendor?

Yes. As long as the accounting period is still open, you can edit the purchase order. If you've already shared it with your vendor, we recommend notifying them of any changes.

Can one shipment include multiple purchase orders?

Yes. A shipment can contain inventory from one or multiple purchase orders, allowing freight and other shipment costs to be allocated across all included inventory.

Can I receive only part of a purchase order?

Yes. Purchase orders support partial receipts. Inventory becomes available as it is received, while the remaining items continue through the supply chain until they're delivered.

Can I add indirect costs after creating a purchase order?

Yes. You can add or update indirect costs at any time while the accounting period remains open. Finaloop automatically recalculates landed costs and updates inventory values as needed.

When should I create a historical purchase order?

Create a historical purchase order if you already had inventory in production or in transit when you began using InventoryIQ. This allows Finaloop to correctly track inventory that was already moving through your supply chain.

What's the difference between a purchase order and a shipment?

A purchase order records what you've ordered from your vendor, including products, quantities, and costs.

A shipment tracks how those goods are transported to your warehouse and records shipping-related costs, such as freight, duties, customs fees, and insurance.

One purchase order may have multiple shipments, and one shipment may contain items from multiple purchase orders.

Why doesn't my purchase order affect my financial statements immediately?

Purchase orders only affect your financial statements once inventory reaches the recognition point you've configured in Supply Chain → Preferences.

Depending on your settings, inventory is recognized when production begins or when it's shipped. As inventory moves through the supply chain, Finaloop automatically updates your inventory balances until the goods are received.

How can I link bill credits from this vendor to the PO?

You can add the credit on the PO by clicking +Discount and then selecting Credit from the dropdown list. It will reduce the PO rolling balance for that vendor. You can link the PO to the Bill as well as the Bill Credit from the Vendor page.

Managing your POs in Finaloop