What is a purchase order?
A purchase order (PO) is a buyer's document that formally orders goods from a supplier. Here is what it contains, how it differs from a quote, and an example.
By the PromptLab team16 October 20263 min read
Definition
Purchase order (PO)
A purchase order is a document a buyer sends to a supplier to order goods or services. It lists what is wanted, the quantities, the agreed prices and the delivery terms, and it carries a unique PO number. Once the supplier accepts it, it is a binding commitment.
A quote is the seller's offer. The purchase order is the buyer's yes, in writing.
Why a purchase order matters
For the buyer, a PO is control. It shows that spending was approved, and it gives accounts payable something to match against the delivery and the invoice.
For the seller, it is proof of an order. It is the document you can point to if there is a dispute about price, quantity or date. Many larger buyers will not pay an invoice that does not quote their PO number.
What a purchase order contains
- The buyer's details and a unique PO number
- The supplier's details
- Product lines with description, quantity, unit and price
- The delivery address and the date required
- Payment terms
- Any reference to the quote it accepts
Purchase order versus sales order
They describe the same transaction from two sides. The buyer creates the purchase order. The seller creates a sales order to record it and plan the delivery. The numbers differ because each company uses its own, so keep both on file.
Purchase order versus invoice
The PO comes before the goods. The invoice comes after or with them. A PO is a request to deliver, and an invoice is a request to pay.
How a purchase order is used
- The buyer sends an RFQ and receives quotes.
- The buyer picks a supplier and issues a PO.
- The supplier checks the PO against its quote and confirms.
- The supplier ships and invoices, quoting the PO number.
- The buyer matches PO, delivery note and invoice, then pays.
If the PO differs from the quote, for instance a different price or date, sort it out before shipping, in writing.
An example from product sales
A food manufacturer sends a chemicals distributor a PO for 8 tonnes of citric acid at the quoted price, to arrive on a set date. The rep compares it with the quote, notices the buyer has asked for a week earlier than quoted, and confirms by email that the earlier date works. The sales order is raised, the PO number goes on it, and the invoice later quotes the same number.
Related terms
- RFQ: the request that often comes before a PO.
- Sales order: the seller's record of the same order.
- Quote-to-order: the process from quote to confirmed order.
- Lead time: the time from order to delivery that the PO date depends on.
How PromptLab handles it
PromptLab is not a purchasing system, and it does not manage purchase orders on the buyer's side. It is the seller's CRM: the quote sits on the deal, and the sales order and the conversation with the buyer sit on the account, on every plan. When a PO arrives by email, WhatsApp or Telegram, it lands in the shared Inbox next to the account, and you can check it against the quote before you confirm.
Frequently asked questions
Is a purchase order a contract?
Once the supplier accepts it, it generally forms a binding agreement on the terms it states. Terms and conditions on the quote and on the PO can conflict, so check both.
Who creates a purchase order?
The buyer. The seller creates a sales order in return.
What is a PO number for?
It identifies the order. Both sides quote it on delivery notes and invoices so documents can be matched and payment is not delayed.
Can a purchase order be cancelled?
Sometimes, depending on the terms agreed and how far the order has progressed. Custom or made-to-order goods are usually harder to cancel than stock items. Agree the rules before the order.