A purchase order (PO) is the document a buyer issues to formally commit to purchasing specified goods or services from a supplier, at agreed prices and terms.
What it means
Issuing a PO usually follows a quotation or pro forma invoice and precedes delivery and the supplier's own invoice - once accepted by the supplier, it forms the contractual basis for the transaction.
Where it fits in
Larger organisations match the PO, the delivery note and the supplier's invoice before authorising payment, a three-way match that catches pricing or quantity discrepancies before money moves.
Key rules
- Issued by the buyer, committing to a purchase at agreed terms.
- Usually precedes delivery and the supplier's invoice.
- Referenced on the delivery note and invoice that follow it.
- Used in three-way matching (PO, delivery note, invoice) before payment.
