In one line
A document you issue to a supplier that commits to buying named goods at named prices.
Also called a PO or a supplier order.
What it means in practice
A purchase order is the order in writing: what you want, how many, at what price, delivered where and when. Once the supplier accepts it, it is a contract, and it is what you check the delivery and the supplier's invoice against.
Give purchase orders their own number series. Mixing them into your invoice numbers leaves gaps that have to be explained later.
Example. PO-4520: 12 downlights at $18, delivered to site by Thursday.
Where it shows up on the paperwork
Your details, the supplier's, a PO number, the order date and the required-by date, the items with quantities and prices, and the delivery address and terms.
What goes wrong
- Ordering by phone with no document, then arguing about the price on the supplier's invoice.
- Leaving off the required-by date, which is the only thing the supplier plans around.
- Mixing PO numbers into your invoice series.
The tools for this
Related terms
- PO numberThe client's own reference for an order, quoted on your invoice so their accounts team can match it.
- Work orderThe document that authorises work to be done, describing the scope and signed before it starts.
- InvoiceA document that asks a client for payment for work already delivered.
Common questions
Is a purchase order legally binding?
Once the supplier accepts it, generally yes: it is an offer to buy on stated terms. That is why the quantities, prices and dates on it matter.
What is the difference between a purchase order and an invoice?
A purchase order goes out from the buyer before the goods; an invoice comes back from the seller after. On a job you issue POs to suppliers and invoices to clients.