Knowing how to raise a purchase order is worth the ten minutes it takes to learn, because the PO is the document everything downstream is checked against. Without one you are relying on an email thread and a memory of a phone call.
What a purchase order actually does
It is your instruction to a supplier: what you are buying, how many, at what price, delivered where and when. Once they accept it, you have a contract on those terms.
It also becomes the reference number. The supplier quotes it on their delivery note and their invoice, your team quotes it on the goods received note, and your accounts team matches all three before paying. That process is covered in three way matching.
The eight fields
- Your business details, and the supplier’s.
- A PO number from your own sequence.
- The date, and the date you need delivery.
- The delivery address, which is often not the billing address.
- The lines: description, quantity, unit price.
- The total, and the agreed payment terms.
- Who authorised it.
- Any reference the supplier asked for, such as an account number.
Writing the lines
Be specific enough that the wrong thing cannot arrive. Supplier part numbers help more than descriptions do.
Description Qty Rate Amount
Pine studwork 38x63mm, 2.4m (SKU 4471-24) 120 420 50,400
OSB3 sheathing 2440x1220x11mm (SKU 9903) 40 1,850 74,000
Delivery to site, Thika Road 1 6,000 6,000
Subtotal 130,400
Tax 16% 20,864
Total 151,264Part numbers, dimensions, quantities. If a supplier sends the wrong item against that, the PO settles the argument in one reading.
Delivery details
The delivery address is the field most often wrong, because people copy it from the last order. Put the physical site, not the registered office, and add access notes where they matter: gate code, delivery window, whether there is a forklift.
A pallet that arrives at a locked yard on a Friday afternoon is a pallet you pay to store.
Approval
Decide who may commit money and up to what, before you need to know. Two lines is enough:
- Orders up to 100,000 may be raised by the site manager.
- Anything above needs the owner’s approval, in writing, on the PO.
Then use the signature block on the sheet so the approval is on the document rather than in someone’s inbox.
Numbering
Its own sequence, separate from your invoices. PO-0001 upward, never reused. A supplier who receives two different orders carrying the same number will pick one, and it will be the wrong one.
The general rules are in numbering your documents.
What happens next
The supplier delivers against the PO and sends a delivery note with the goods. Your team records what actually arrived on a GRN. The supplier’s invoice arrives quoting the PO number. Accounts match the three and pay.
If any of the three disagree, the PO is the version you agreed to.
Changing an order
Do not edit a PO you have sent. Issue an amended one with a new number, or a written variation referencing the original, and tell the supplier which supersedes which.
A supplier working from an edited PO they never received is how the wrong quantity arrives.
Keeping the record
Save each PO as you raise it. Nothing is stored for you here, so the file on your disk is the record. Keep them with the GRNs so a match can be reconstructed later.
Next
For a reusable layout, see a purchase order template. For what happens when the goods arrive, see three way matching. Or open the purchase order generator.