Purchase order
A document a buyer sends a supplier to order specified goods or services at agreed prices and terms.
What it means in business
A purchase order (PO) states what is wanted, the quantity, the price, delivery date and place, and payment terms. Once the supplier accepts it, it becomes the agreement for that order. The PO number links the order, the goods receipt and the supplier's bill, which is how a business checks it pays only for what it ordered and received.
Example
A factory orders 2,000 bearings. The PO shows the agreed rate and delivery date. When the bearings arrive, stores records them against the PO, and accounts pays the bill only after the quantity and rate match. This is an illustration of normal business use rather than a quoted case study.
How to use it correctly
Raise a PO before the goods are ordered, not after, and have the right person approve it. Record any change as an amended PO. Match the PO, the goods receipt note and the supplier's bill before paying.
Common confusion
A PO is the buyer's order and a sales order is the seller's record of it. A quotation or RFQ comes before a PO and does not commit anyone. Verbal orders without a PO make it hard to settle a dispute over price or quantity.
Related glossary terms
Written on 24 October 2026 for lamp. Confirm the current rules with the official source or an adviser before relying on it.