Purchase & store glossary
What Is a Purchase Order (PO)? Meaning & Format
Purchase order, in short
A purchase order (PO) is a formal document a buyer sends to a supplier listing items, quantities, agreed rates, delivery date and payment terms. Once the supplier accepts it, it becomes a binding contract and the reference for goods receipt and invoice checking.
Also called: PO, Purchase order format
A purchase order turns an internal need into a commitment with a vendor. It is the document your store checks goods against, and your accounts team checks the bill against.
This page is the short definition. For the full process from indent to payment, read our purchase order process guide.
What a PO format includes
- PO number and date
- Vendor name, address and GSTIN
- Item code, description, quantity and unit
- Rate, discount, taxes and total value
- Delivery date and delivery location
- Payment terms, freight and other terms
- Reference to the indent or purchase requisition
- Authorised signatory
PO vs requisition vs invoice
- A requisition is an internal request. The vendor never sees it.
- A purchase order is what you send the vendor, with the agreed rate.
- An invoice is what the vendor sends you after supplying.
The PO, the GRN and the invoice are compared in a three-way match before payment.
An example
After comparing three quotes for 1,000 nos of Bearing 6210 ZZ, the lowest acceptable rate is ₹5,652. Your last purchase was at ₹5,435, so the new rate is 4% higher. Catching that before the PO is approved is worth ₹2,17,000 on this one order. (Illustrative figures.)
Where POs go wrong
Rates typed from memory, POs approved without seeing the last rate, and no follow-up on delivery. Advance payments are tracked in a separate sheet, if at all. Verbal orders placed "urgently" never get a PO at all, so when the bill arrives there is nothing to check it against.
How IndustryPrime handles it
POs are created from approved indents, previewed and approved remotely. Every PO rate is checked against your own purchase history and any increase is shown before approval. Each PO is tracked from approval to delivery, with advances and pending payments against every PO. See purchase order software.