The essentials
Everything worth knowing about a purchase order.
What is a purchase order?
A purchase order (PO) is a document a buyer sends to a seller to order goods or services at agreed prices. Once the seller accepts it, the PO becomes a binding agreement. The seller then ships the goods and sends an invoice that references the PO number, so the buyer’s accounts team can match the order, the delivery and the bill (the “three-way match”).
Why use purchase orders?
- Control spending - every purchase is approved and documented before money is committed.
- Avoid disputes - prices, quantities and delivery dates are agreed in writing.
- Track inventory - know what is on order and when it will arrive.
- Simplify bookkeeping - match POs to invoices and delivery notes.