A purchase order (PO) is a formal document issued by a buyer to a supplier that specifies the items, quantities, agreed prices, delivery date, and payment terms for a purchase — serving as both a binding commitment and the audit trail that connects every downstream step of the procurement cycle: receiving, invoice matching, inventory update, and accounting entry.
Quick answers
What is a purchase order? A purchase order is a written instruction from a buyer to a supplier: ship these items, in these quantities, at these prices, to this address, by this date. Once the supplier acknowledges the PO, it becomes a binding agreement. Every downstream process — receiving, invoice matching, payment, and accounting — references the PO number as the authoritative record of what was ordered.
What is the difference between a purchase order and an invoice? A purchase order flows from buyer to supplier and says "please send us this." An invoice flows from supplier to buyer and says "please pay us this." The PO is created before the goods ship; the invoice is created after. In a well-run operation, the invoice is matched against the PO and the receiving record before payment is approved — this is three-way matching.
What is the difference between a purchase order and a sales order? They are the same transaction seen from opposite sides. When you issue a PO to your supplier, you are the buyer. When your supplier enters that order into their system, it becomes a sales order on their side. If you sell to other businesses, your customers' POs become your sales orders.
Do businesses need purchase orders? If you buy from the same suppliers regularly and care about controlling costs, yes. Without a PO, there is no reference point for what you agreed to pay, no way to verify what arrived matches what was ordered, and no structured data for your accounting system. One-off cash purchases at a retail counter do not need a PO. Recurring supplier relationships do.
A complete PO includes: PO number, issue date, vendor name and contact, ship-to address, line items with SKU or description, quantities, units of measure, unit prices, expected delivery date, payment terms, and any special instructions. The PO number is the key — it links every subsequent document in the procurement cycle back to the original order.