A purchase order (PO) is the document a buyer sends to a supplier to confirm an order. It lists the items or services, quantities, unit prices, delivery date and address, payment terms, and a PO number that the supplier should quote on its invoice.
The requisition is the internal request, the PO is the order sent out, and the invoice is the supplier's bill. Matching the three is how accounts payable knows a bill is legitimate.
Why it matters
A PO makes price and quantity explicit before anything ships, so there is something to check the invoice against. It also commits budget at the moment of ordering, which shows what the company owes before the bills arrive.
Example
PO-1042 goes to a packaging supplier for 5,000 boxes at $0.80 each, $4,000 in total, Net 30, delivery by May 15 (illustrative). The warehouse records the delivery against PO-1042, the invoice quotes PO-1042, and accounts payable matches the three before paying.
Common pitfalls
- POs created after the invoice arrives, only so the invoice can be processed. The PO then controls nothing.
- Changes made by phone. Price or quantity changes that are never reflected on the PO cause mismatches later.
- Invoices without a PO number, which leave accounts payable guessing which order they belong to.
- Open POs never closed. Old commitments keep showing as owed long after the work is done.
For recurring services, a blanket PO covers a period and a ceiling amount, so each monthly invoice does not need its own order.