A purchase order (PO) is an official document generated by a buyer of goods or services as an offer for the seller, it becomes a legal document of contract once the seller accepts the purchase order.
When a business wants to order goods it goes through a procurement process where it has to finalize a particular seller out of all available options and consequently has to begin a formal procedure to purchase the goods, generating a PO is among the first few steps of procurement of goods or services.
There are 4 different types of purchase orders such as Standard PO, Planned PO, Blanket PO & Contract PO.
Nowadays companies manage their entire procurement process with ERP systems for e.g. SAP Ariba, Oracle iProcurement, IBM Emptoris Procurement etc.
It contains the following:
- Date of order
- PO number
- Name and address of purchaser
- Name and address of supplier
- Mode of transport
- Details of purchase
- Shipping terms
- Payment terms
- Shipping date
- Quantity ordered
- Details of tax (if any)
- Signature of the authorized personnel from Seller’s side
Purchase Order Example Template
You can now download a purchase order template from here for free!
Below is a modified snapshot from the linked template showing UNREAL Corp. buying 200 KG oranges at the currency value of 100/KG, the total order value including taxes is 23,600. Though a PO can look like an invoice but they are different and have their own specific purpose.