Glossary
What is a purchase order?
A purchase order is a buyer's written request to buy goods or services at agreed prices. Learn how it works and how it differs from an invoice.
Updated · By PayToMe Editorial
A purchase order is a document a buyer sends to a seller to request goods or services at stated quantities, prices and terms. Once the seller accepts it, it records what was agreed and gives the buyer a reference number to track the purchase.
How it works
Companies use purchase orders to control spending. A manager requests something, finance approves a budget and the buyer issues the order before any money is committed.
- Quote. You send a price for the work.
- Purchase order. The buyer approves and sends a PO with a PO number, the items, prices, delivery date and payment terms.
- Delivery. You do the work or ship the goods.
- Invoice. You bill against the PO, quoting its number.
- Match and pay. The buyer’s accounts payable team checks that the invoice agrees with the PO and any delivery record, then pays.
A purchase order is not a request for payment. It is a promise to buy under certain conditions. The invoice is the request for payment. Quotes and estimates come before the PO. Read the PO for terms that may override yours, such as payment days, who owns the work and what counts as acceptance.
If anything on the PO is wrong, such as a price or a quantity, tell the buyer and ask for a corrected PO before you start.
Example
A restaurant orders from a catering supplier.
| Document | Sender | Date | Content |
|---|---|---|---|
| Quote | Supplier | June 1 | 40 trays at $65 |
| Purchase order PO-5521 | Restaurant | June 3 | 40 trays at $65 = $2,600, net 30 |
| Delivery | Supplier | June 10 | 40 trays delivered |
| Invoice INV-118 | Supplier | June 10 | References PO-5521, $2,600 |
| Payment due | Restaurant | July 10 | $2,600 |
The invoice amount matches the PO exactly, so the match is quick. Create your side with the free invoice generator, and keep each line item aligned with the order.
Related terms
- PO number: the reference that links the PO to your invoice.
- Accounts payable: the buyer’s team that pays invoices.
- Line item: the rows that should match the order.