What Is a Purchase Order?

A purchase order (PO) is a document a buyer sends to a supplier to confirm an order, listing the items, quantities, agreed prices, delivery date, and terms. Once the supplier accepts it, the PO becomes the shared reference both sides work from: the supplier picks and invoices against it, and the buyer checks the delivery at goods receiving and the invoice at payment against the same numbers. POs cover everything a business buys to operate, from consumables ordered monthly to one-off equipment purchases.

What a purchase order includes

• A unique PO number - the reference everything else hangs off: the supplier’s confirmation, the delivery note, the invoice.
• Buyer and supplier details - legal names, addresses, and the contact responsible on each side.
• Line items - product code or SKU, description, quantity, unit price, and line total for each item.
• Delivery details - where, when, and how the goods should arrive.
• Payment terms - currency, payment window (for example 30 days from invoice), and any agreed discounts.
• Authorisation - who in the buying organisation approved the spend.

How the PO process works

1. A need is identified - stock hits its reorder point, or someone requests equipment.
2. The PO is raised and approved internally - in most organisations, larger amounts need sign-off from a manager or owner before anything is sent.
3. The PO goes to the supplier, who confirms price, quantity, and delivery date - or flags changes before anything ships.
4. The goods arrive and are checked against the PO: right items, right quantity, acceptable condition.
5. The invoice arrives and is matched against the PO and the receiving record - the “three-way match” - before payment is approved.

The quiet value of the process is that disagreements surface early. A price change or substitution gets caught at confirmation, a short delivery at receiving, an overcharge at matching - each at the cheapest possible moment to fix it.

Purchase order vs invoice

The two are easy to confuse because they often list identical line items. The PO travels from buyer to supplier before delivery and authorises the purchase; the invoice travels from supplier to buyer after delivery and requests payment. One opens the transaction, the other closes it. When the numbers on the two documents disagree, the PO is the record of what was actually agreed.

Purchase orders in practice

Small teams often skip POs and order by email or phone, which works until it does not: an unexpected invoice lands, nobody remembers agreeing the price, and there is nothing in writing to check it against. A lightweight PO habit - even a numbered PDF per order - fixes that without ceremony. Kitchens and caterers reordering against kitchen equipment and supplies are a classic case: many small orders, many suppliers, and every undocumented one is a future argument. AMPthilly’s purchasing module raises POs as PDFs or emails them straight to the supplier, with high-value orders routed through admin approval first.

Related terms

• Goods Receiving - checking deliveries against the PO when they arrive
• Stocktake - the periodic count that verifies what all those orders added up to
• Consumables - the restockable items most routine POs are raised for
• FIFO - first in, first out; the usual rotation method for delivered stock
• LIFO - last in, first out; the alternative stock valuation and rotation method