Inventory · 5 min read
Purchase Orders and Reorder Points for Small Retail
How to set reorder points, raise purchase orders, receive partial deliveries and keep supplier balances right in a small shop.
Retail Operations Desk · · updated
Key takeaways
- A reorder point is the stock level at which you order again; it equals expected sales during the supplier's lead time plus a safety buffer.
- A purchase order records what you asked for; receiving records what actually arrived, and the two often differ.
- Receive partial deliveries against the same order so you can see what is still owed.
- Every purchase and purchase return changes what you owe the supplier, so the ledger should update automatically.
Running out of a best-seller loses sales; ordering too much of a slow item ties up cash on a shelf. Purchase orders and reorder points are how small shops steer between the two without guessing. This guide covers how to set a reorder point, how a purchase order flows from request to receiving, what to do with short deliveries and returns, and how all of it lands in your supplier’s ledger.
What is a reorder point?
A reorder point is the stock level at which you place a new order. It equals the units you expect to sell while waiting for the delivery (lead-time demand) plus safety stock to cover delays or a busy week. When stock on hand drops to that level, you reorder.
Reorder point = (average daily sales × lead time in days) + safety stock
The formula is simple; the work is in honest inputs. Average daily sales should come from your own sales report, not memory. Lead time is the number of days between placing the order and having the goods on your shelf, including the day you spend receiving and labelling them.
Worked example (example numbers only)
Take a phone charger that sells steadily. These numbers are made up to show the arithmetic:
| Input | Example value |
|---|---|
| Average daily sales | 4 units |
| Supplier lead time | 6 days |
| Lead-time demand | 4 × 6 = 24 units |
| Safety stock | 8 units (two extra days) |
| Reorder point | 32 units |
When stock of that charger reaches 32, you order. If the supplier needs a minimum order quantity, order at least that; if you have room and cash, order enough to cover a few weeks so you are not reordering every week.
How much safety stock should I keep?
Keep enough safety stock to cover the sales you would lose if the delivery is late or demand jumps. For reliable local suppliers, a couple of days of average sales is often enough. For imports, slow suppliers or seasonal spikes such as holidays and Eid, keep more.
Safety stock is not the same for every item. Your best-sellers deserve a bigger buffer, because running out costs real sales and sends customers elsewhere. Slow movers can run lean, because a delay costs little.
Which items should get reorder points first?
Start with the items that matter most:
- Top sellers by revenue — check your trending products or sales-by-product report.
- Items customers come in specifically for (phone cases for popular models, gift-wrap, batteries).
- Items with long lead times — imports and anything from a distant supplier.
Everything else can wait. Setting reorder points on hundreds of slow items at once is a weekend lost for little gain.
How does a purchase order work from start to finish?
A purchase order records what you ask a supplier for, before goods arrive. When the delivery comes, you receive it against the order, entering what actually arrived and at what cost. Stock increases at receiving. The supplier’s balance increases by the value received, and payments reduce it.
- Spot the need: stock alert or report shows items at or below their reorder point.
- Raise the purchase order to the supplier, with items, quantities and expected costs.
- Send it to the supplier as a PDF or message.
- Receive the delivery against the order: confirm quantities, enter costs, scan serials or IMEIs if the item uses them.
- Label the stock: print barcode labels for the units received.
- Pay the supplier in full or in part, according to your pay terms.
Why not just record the purchase when goods arrive?
You can, and many shops start that way. A purchase order adds two things: a record of what you expected, so short deliveries and price changes show up immediately, and a list of what is still on order, so nobody orders the same item twice from a different supplier.
How do I receive a partial delivery?
Receive only what arrived, against the same purchase order. The remaining quantity stays open, so you can see exactly what the supplier still owes. When the rest arrives, receive it against the same order. If the supplier cannot supply the balance, close or cancel what remains.
| Situation | What to record | Effect on stock | Effect on supplier balance |
|---|---|---|---|
| Full delivery | Receive all lines | Up by full quantity | Up by full value |
| Short delivery | Receive what arrived | Up by arrived quantity | Up by arrived value |
| Price changed on invoice | Receive at invoice cost | Up as received | Up at the new cost |
| Faulty units found later | Purchase return | Down by returned units | Down by returned value |
| Balance will never come | Close the remaining quantity | No change | No change |
Should I check costs at receiving?
Yes. Enter the cost on the supplier’s invoice, not the cost you expected. Your profit reports are only as good as the costs you receive at, and a supplier who quietly raises prices shows up at receiving long before it shows up in your margins.
What is a purchase return and when do I use one?
A purchase return sends goods back to the supplier: faulty units, wrong items or overstock the supplier agrees to take back. Recording it reduces your stock and reduces what you owe the supplier, or creates a credit if you have already paid. For serialized items, the exact units returned are recorded.
How do purchases affect the supplier ledger?
Every purchase increases what you owe a supplier; every payment and purchase return reduces it. A supplier ledger lists these entries in date order with a running balance, so you always know what you owe, what is overdue against your pay terms, and what each payment covered.
In many markets, especially Pakistan’s wholesale bazaars, this running account is the backbone of the supplier relationship — a khata that both sides keep. Keeping it in the same system as your purchases means it can’t drift: the ledger is built from the purchases and returns you actually recorded, not from a separate notebook.
What should I check before paying a supplier?
- Open the supplier’s ledger and check the balance.
- Confirm every purchase on it was actually received.
- Check that returns and credits have been recorded.
- Pay, and record the payment against the supplier with the method used.
How often should I review reorder points?
Review reorder points every few months for your top sellers, and before every seasonal peak. Sales speed changes, suppliers change their lead times and new models replace old ones. A reorder point set in spring for a phone case can be badly wrong by the time the next model launches.
How RetailPOS Studio handles it
RetailPOS Studio sets an alert quantity per product so low stock shows up in reports and alerts, lets you raise purchase orders, receive full or partial deliveries against them (scanning serials where the product uses them), record purchase returns, and keeps a supplier ledger with pay terms and payments that updates from every purchase and return. See purchase orders, supplier ledgers, inventory and reports. The help article on creating a purchase order walks through it step by step, and pricing shows which plan includes purchase orders.
