Purchase Order (PO)

Basics

A commercial document issued by a buyer to a seller indicating types, quantities, and agreed prices.

Detailed Explanation

A purchase order is sent by a buyer to a seller before receiving goods or services. It formally authorizes a purchase and specifies exactly what is being ordered, quantities, prices, and delivery terms. Once accepted by the seller, it becomes a legally binding contract. Purchase orders help businesses track orders, control spending, and match invoices to approved purchases. Many organizations require PO numbers on invoices for payment processing.

Examples

  • A company issues a PO for office supplies before delivery
  • An invoice must reference the PO number for payment approval

Related Terms

Invoice Quote / Estimate Accounts Payable (AP)

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