purchase-order-example-and-templates-a-complete-guide

Purchase Order Example and Templates: A Complete Guide

ByRebecca Last Updated on -

In today’s business landscape, effective procurement and financial control are essential for success. Imagine running a small business and suddenly realizing you’ve been double-billed for office supplies. Avoiding such scenarios is where a purchase order example comes into play.

Purchase orders (POs) are vital tools that help streamline procurement processes, maintain accurate records, and prevent fraud. Let’s delve into the intricacies of purchase orders, their components, types, and the benefits they offer.

Key Takeaways

  • Definition and Purpose: A purchase order (PO) is a commercial document issued by a buyer to a seller, outlining the details of a purchase, including quantities, prices, and delivery terms.
  • Legal Protection: POs provide legal protection for both buyers and sellers by establishing a formal agreement on the transaction terms, helping to prevent disputes.
  • Process Efficiency: Implementing a PO system improves business efficiency by streamlining order tracking, budgeting, and inventory management.
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What is a Purchase Order

A purchase order creates a legal bond between the seller and the buyer. A purchase order mentions order details like product/service specification, quantity, and types. It also mentioned the payment terms and delivery terms. 

The buyer creates a purchase order and presents it to the seller. Once accepted, it gets enforced and takes the form of a legal commercial agreement. 

What is a Purchase Order Requisition?

A purchase order requisition is an internal instrument that a company’s employee creates to request the purchase of a product. It stays in the company and may result in a purchase order if approved. 

The difference between purchase order requisition and a purchase order is that the former does not create a legal binding whereas a purchase order creates a legal bond between the buyer and the seller of a product. 

How does a purchase order work?

A purchase streamlines the goods and service procurement process. Most small businesses create a purchase order directly without using the purchase requisition form. 

Bonus Tip: Looking to start a new small business? Check these small business ideas for quick inspiration.

A purchase order clearly mentions the details of products, the quantity, when they are needed, and how payment will be made. 

Many small and medium businesses start the procurement process with a purchase requisition form. As we explained earlier, a purchase requisition form is the internal request for buying some goods or services. 

If the purchase requisition form is approved, the management issues a purchase order for the requested product or service. Management also confirms the quantity, the price, delivery date or delivery schedule and payment terms. 

When the seller accepts the purchase order, it becomes legally binding. The product is delivered as per the agreed schedule on the purchase order and the payment is also made accordingly. 

Components of a Purchase Order

A well-structured purchase order includes several key components:

  1. PO Number: A unique identifier for tracking and reference.
  2. Date: The date the PO was issued.
  3. Supplier Information: Name, address, and contact details of the supplier.
  4. Buyer Information: Name, address, and contact details of the buyer.
  5. Item Description: Detailed description of the goods or services being ordered.
  6. Quantity: The amount of each item requested.
  7. Price: The agreed price per unit and the total cost.
  8. Delivery Date: When the goods or services should be delivered.
  9. Payment Terms: Agreed terms for payment, including due dates and methods.

Types of Purchase Orders

There are various types of purchase orders, each serving different procurement needs:

  1. Standard Purchase Order: Used for one-time purchases where the details of the transaction are known.
    Example: Ordering 100 units of office chairs from a supplier.
  2. Blanket Purchase Order: Used for recurring purchases over a period, typically with set terms but unspecified quantities.
    Example: A blanket PO for monthly office supplies.
  3. Contract Purchase Order: Used when the terms of the purchase are set out in a contract, but the exact items and quantities are flexible.
    Example: A contract PO for IT consulting services.
  4. Planned Purchase Order: Used for purchases planned in advance but not yet confirmed.
    Example: Planned PO for seasonal merchandise.

How to Create a Purchase Order?

You can use your bookkeeping software or ERP for generating a purchase order.  Pro Tip: You can check for our bookkeeping services for small businesses. When you make it mandatory to use a purchase order for any new purchase or any goods or services, you will save a lot of trouble in price uncertainty, delay in the delivery, bad purchase experience, and many other supply chain problems.  We have also suggested some tools and accounting software for easily creating purchase orders. However, if you are using spreadsheets, you can simply make a purchase order with the help of a purchase order template for excel or Google spreadsheets.  Here is how you can make a purchase order for your business. 
  • Choose a template for the type of tool you will use like MS Word, Excel, Goolge Docs, Goolge Sheets, etc. 
  • Input the data 
  • Write the Purchase Order number (PO number)
  • Add buyer seller information
  • Add product details 
  • Mention the delivery date 
  • Add terms and conditions for the transactions 

Purchase Order Example 

Here is an example of a purchase order. You can see how the data is filled in this example purchase order. Download purchase order example.

Purchase Order Template 

You can make use of this free purchase order template. We also have a purchase order template excel and purchase order template word. Download our helpful PDF Template. 
Purchase order template

Purchase Order vs Invoice

What’s the Difference between Purchase Order and Invoice?

The difference between a purchase order and an invoice lies primarily in the way these are used. 

A purchase order is used to control and track the purchasing for a company. A buyer creates a purchase order and sends it to the seller or vendor. 

Whereas, an invoice is the payment request that a seller generates to recover payment for the products or services delivered. 

Download free invoice template to create a professional invoice for your business now.

Purchase Order Invoice
Buyer sends a purchase order to the vendor for the purchase of a product
The vendor or sellers sends to the buyer for recovering the dues for products delivered as agreed payment terms
A buyer generates a purchase order when placing an order
Invoice is generated when the order has been delivered
A purchase order defines the terms and conditions for the purchase
Confirms and sometimes closes the sale with the payment
Helps resolve supply chain problems
Helps with payment management

Similarities between Purchase Order and Invoice 

Here is how an invoice is similar to a purchase order. 

  • Both are commercial communications used to handle different aspects of a purchase life cycle 
  • Help both buyer and seller optimize the spend 
  • Improve supply chain
  • Both documents has order details, vendors and buyer details, and shipping information
  • Both documents are legally binding

Pros and Cons of Purchase Order 

Pros of using Purchase orders 

  • No more duplicate order if you use purchase order 
  • No surprise invoices, everything is planned already 
  • Incoming order tracking 
  • Better check on price changes 
  • Better auditing compliance 
  • Improves financial accuracy and predictability 
  • helps make better budgets 
  • Better communication with business partners
  • legally binding, peace of mind for both parties

Cons of using purchase orders 

  • Additional paperwork and workload 
  • Buying using credit cards may be better solution for small businesses 

Best Small Business Software and Tools for Creating Purchase Order 

If you are in the market for a new software and tool for creating and managing purchase orders for your business, check out our recommendations here. 

  1. Paramount WorkPlace (Recommended)
  2. Zoho Books
  3. KissFlow
  4. Purchase Control
  5. O2b Technologies
  6. WorkflowMax
  7. DPO
  8. Xero
  9. Bellwether
  10. SalesAttach
  11. Sage Intacct
  12. Ecomdash
  13. Procurify

Check this post for more business tools you will need in your business. 

FAQs:

A purchase order example is a sample document that illustrates how a PO should be structured and what information it should contain.

A well-designed purchase order includes all necessary components such as PO number, date, supplier and buyer information, item description, quantity, price, delivery date, and payment terms.

A blanket purchase order example involves recurring orders over a set period. For instance, a blanket PO might be used for monthly office supply purchases with predetermined terms.

Purchase orders help maintain accurate records, prevent fraud, streamline procurement processes, and improve supplier relationships.

Yes, you can download an example purchase order form template to streamline your procurement process.

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