What is a Purchase Order? [FREE Template]

by Nicolette Emmino

A purchase order (PO) is the official confirmation of an order. This document is sent from a purchaser to a vendor in order to authorizes a purchase.

The purchase order is a form of risk protection. In addition to legal protection, purchase orders assist in inventory management and payment tracking. They allow suppliers to track and compare ordered inventory with shipped and in-stock inventory, as well. Buyers keep POs to monitor receipt of items.

Whether you’re a small or large business organization, a purchase order will be a common staple in your purchasing department. The reason for this is that the document sets clear expectations, assists with managing orders and budgets, and are important for audit trails.

How is it submitted?

In many cases, the purchasing department will handle purchase orders, many times through an electronic software system for accurate tracking and electronic submission of orders to the supplier.

What information is included?

A purchase order will usually include a PO number, shipping date, billing address, shipping address, payment information, expected delivery date, requested items, quantities, and price. Various programs contain entry fields for each piece of important information so that the purchaser can simply fill in the fields before processing and send the order.

PO vs. Invoice

A purchase order is different than an invoice. An invoice is a formal request for payment sent from the vendor to the purchaser.

Both documents are still legally binding contracts meaning that an agreement has been made by both parties and each document contains the actions that are required by each. They will also contain some of the same details such as order specs, mailing information, and pricing. The PO number is typically included on the invoice for reference.D

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