Key takeaways
- A PO is issued by the buyer; an invoice is issued by the supplier.
- Include a PO number, supplier details, items, prices, delivery address and date, and payment terms.
- Suppliers should quote your PO number on their invoice.
- Matching PO, delivery note and invoice (three-way matching) prevents paying for goods you did not receive.
Fields to include on a purchase order
- PO number and date.
- Buyer and supplier legal names and addresses.
- Item descriptions, quantities, unit prices and totals.
- Tax, currency and the grand total.
- Delivery address, required date and shipping terms.
- Payment terms and an authorised signature.
How a PO fits into the buying process
| Step | Document | Issued by |
|---|---|---|
| 1 | Quotation | Supplier |
| 2 | Purchase order | Buyer |
| 3 | Delivery note | Supplier |
| 4 | Invoice | Supplier |
Frequently asked questions
Is a purchase order a contract?
Once the supplier accepts it, a PO usually forms a binding agreement on the stated terms. Local law varies.
Can a small business use purchase orders?
Yes. Even a one-person business benefits from a written record of what was ordered and agreed.