What is a purchase order?
A purchase order (PO) is the document a buyer sends to a vendor to order goods or services at an agreed price. It lists what you want, how many, the unit price, where to deliver and by when. Once the vendor accepts it, the PO becomes a binding agreement, and the vendor quotes the PO number on its invoice so your accounts team can match the two.
Purchase order vs invoice
| Purchase order | Invoice | |
|---|---|---|
| Sent by | Buyer | Seller / vendor |
| When | Before the goods or work are delivered | After delivery (or at an agreed milestone) |
| Purpose | Authorises the purchase and fixes price and quantity | Requests payment for what was delivered |
| Number | PO number (e.g. PO-1042) | Invoice number, usually referencing the PO |
Many companies use a three-way match: they only pay an invoice when it agrees with the purchase order and the delivery note or packing slip.
What to include on a purchase order
- A unique PO number and the order date
- Buyer details (your business) and the vendor name and address
- The delivery address and required delivery date
- Each item with a clear description, SKU or part number, quantity and unit price
- Subtotal, tax, shipping and the total order value
- Payment terms (for example Net 30) and any delivery or inspection instructions
- The name of the person authorising the order
How to create a PO with this tool
- Enter your business as the buyer and add your logo.
- Add the vendor's name and address, and put the delivery address in the notes if it is different from yours.
- Set the PO number and the delivery date.
- Add each item with quantity and agreed unit price; tax and shipping are optional.
- Write your payment and delivery terms in the notes, then click Download PDF and email it to the supplier.
Frequently asked questions
Is a purchase order legally binding?
A PO is an offer to buy. Once the vendor accepts it – in writing or by delivering the goods – it generally forms a binding contract on the terms in the PO. Check local law for high-value orders.
Who creates the purchase order number?
The buyer. Use a simple sequential format such as PO-001, PO-002, and ask suppliers to quote it on every invoice and delivery note.
Do small businesses need purchase orders?
Not always, but POs help you control spending, avoid disputes about price or quantity, and match supplier invoices quickly – useful once you buy from several suppliers.
Can I add tax and shipping to a PO?
Yes. Enter a tax rate and a shipping amount and the total updates automatically. Leave them blank if the supplier will add them on its invoice.
