Purchase order template and maker

What a purchase order is and why businesses use one

A purchase order, usually shortened to PO, is the buyer's document. When a business wants to order something from a supplier, it writes down what it wants, how many, at what price, where it should be delivered and by when, gives the order a number, and sends it to the supplier. The supplier checks it, confirms it if everything is right, and delivers. Later the supplier sends its own invoice for what it delivered, and that invoice quotes the PO number so the buyer can see straight away which order it belongs to.

Businesses use purchase orders for a few practical reasons. The first is simply having the order in writing: if the supplier delivers the wrong quantity or charges a different price, both sides can point to the same document instead of trying to remember a phone call. The second is budget control, because in a company where several people can buy things, the PO is the moment someone decides that money will be spent, so the business knows what it has committed to before the invoices arrive. Even a one-person business finds it useful to see at a glance what is on order and what each order should cost.

The third reason is what accountants call the three-way match, which sounds technical but is simple. When the supplier's invoice arrives, the person paying it compares three papers: the purchase order (what you ordered), the delivery note that came with the goods (what actually arrived) and the invoice (what you are being charged). If all three agree, the invoice gets paid; if the invoice charges for 200 boxes and only 150 arrived, someone sorts that out before any money leaves. It's a habit of careful bookkeeping rather than a formality, but it explains why so many companies insist that every supplier invoice carries a PO number.

What goes on a purchase order, with an example

There is no single official layout for a purchase order, so what goes on it is whatever lets the supplier fill the order correctly and lets you check their invoice later. In practice almost every PO carries the same details, and this is the list to check yours against:

• your business name and address as the buyer, and the supplier's name and address
• the PO number and the order date
• the date you need the goods or the work delivered by
• a delivery address, if it differs from your business address
• each item with its quantity, unit and price, and the VAT or sales tax on it
• the totals before and after tax
• terms such as payment terms or delivery conditions
• a request to quote the PO number on the invoice

The PO number does the most work, because it is the reference that ties the order, the delivery and the invoice together. Give every order its own number in a simple series (PO-1, PO-2, PO-3) and never reuse one, and the closing request to quote it is there because it is the one detail you most need back. The order date tells the supplier when you placed the order, while the delivery date tells them when you need it, which is what they will plan around. If the goods should go somewhere other than your business address, such as a second shop, a warehouse or a client's site, add that address so the driver doesn't turn up at your office.

The lines should be specific enough that nobody could deliver the wrong thing: a product code or size where there is one, the quantity, the unit it is counted in, and the price you agreed, which is usually the price from the supplier's quote. Adding the tax and the total gives the supplier the figure you expect to see on their invoice, so any difference is easy to spot. Terms go in the notes, for example how long you will take to pay once the invoice arrives (see payment terms such as Net 30), delivery hours, or whether partial deliveries are acceptable.

Here is what that looks like for a small bakery ordering packaging. Rye & Crumb has two shops and buys from a packaging wholesaler; this order is PO-14, dated 3 March, and the goods are needed by 10 March at the second shop rather than the office.

Under the lines the PO adds VAT at the rate that applies to each one and shows the total including it. The notes say "Payment 30 days from the date of your invoice. Deliver weekdays before 10:00 to the side entrance.", and the last line reads "Please quote PO number PO-14 on your invoice." When the wholesaler's invoice comes in, the bakery's bookkeeper can lay it next to PO-14 and the delivery note signed at the shop and check it line by line before paying.

Purchase order vs invoice

The easiest way to keep the two apart is to ask who sends each one and what it asks for. The buyer sends the purchase order before anything is delivered, and it asks the supplier to supply something. The supplier sends the invoice once the goods have been delivered or the work is done, or at whatever point you agreed, and it asks the buyer to pay. A PO is never a request for payment, which is why it has a delivery date where an invoice has a due date. So one transaction usually has both: the bakery's PO-14 goes out to the wholesaler, and the wholesaler's invoice comes back quoting PO-14.

They also end up in different places in the books. A purchase order records an order placed, and nobody records it as a sale or a purchase. The invoice is the document the accounts are built on: the supplier records it as a sale, the buyer records it as a purchase, and it is the invoice, not the PO, that your accountant works from. If you want to know what an invoice contains and why, what an invoice is explains it from the start.

A quote fits in before both. It comes from the supplier, in answer to "what would this cost?", and sets out the price they are offering. If you accept it, a PO is the formal way to say yes: you order what was quoted at the quoted price, and the PO number becomes the reference for everything that follows. The usual order of papers is therefore a quote from the supplier, a purchase order from the buyer, a delivery note with the goods, an invoice from the supplier, and then payment. For the difference between the supplier's own two documents, see the difference between a quote, an estimate and an invoice.

When a client sends you a purchase order

If you are a freelancer or a small supplier, you are more likely to receive purchase orders than to write them, especially once you work for larger companies. The client's PO is their order to you, and it is worth reading properly when it arrives, because it is what their accounts team will check your invoice against. Compare it with what you quoted: the description of the work, the number of days or units, the rate and the delivery date. If something differs, say so before you start, because it is far easier to get a corrected PO now than to argue later about an invoice that doesn't match.

When you invoice, put the client's PO number on your invoice exactly as they wrote it, including any letters or dashes. Many companies' accounts payable teams, the people who pay supplier invoices, match every incoming invoice to an open PO, and an invoice without the number often sits in a queue or comes back with a request to reissue it, which means waiting longer for your money. The PO number belongs to the client and sits alongside your own invoice number rather than replacing it, since your invoices still follow your own series. In the maker you add it as a custom field: call the field "PO number", type in the client's number, and it prints on the invoice.

Keep the invoice consistent with the order, too. If the PO was for 10 days at €550 and the job took 12, the client will usually want the extra two days covered by a new or amended PO before paying for them, so ask for it as soon as you know the work will run over. If one PO covers several invoices, such as a monthly retainer, quote the same PO number on each so the client can see how much of the order has been used.

Making a purchase order in the maker

The maker has the purchase order as its own document type, so you can write POs in the same place as your invoices and quotes. Making one takes these steps:

1. Open the maker with the button on this page, which starts a new purchase order; if you are already in the maker, choose Purchase order from the document menu.
2. Fill in your business details, since on a purchase order your business is the buyer. Add the supplier as a contact, and the maker keeps them for your next order.
3. Check the PO number, which counts up in its own series (PO-1, PO-2 …), and set the order date and the delivery date. If the goods should go somewhere other than your business address, type that address under Deliver to.
4. Add the items with quantity, unit, price and the VAT or sales tax rate for each line, and the maker works out the totals.
5. Put payment terms and delivery conditions in the notes and terms. You don't need to write the PO-number request yourself, because the PDF prints "Please quote PO number PO-1 on your invoice." with the right number.
6. Download the PDF, or send it by email or as a link with a free account, and set its status to sent; when the supplier confirms the order, set it to accepted.

Because a PO doesn't ask for payment, there is no payment request on it, and it never counts in your invoice totals or the VAT summary. Purchase orders have their own tab in the overview instead, so your sales figures stay clean. A purchase order doesn't turn into an invoice either, since it is your supplier who invoices you, and the maker doesn't track deliveries received, so the check against the delivery note is one you do yourself.

If your invoice language is US English, the maker calls the supplier the Vendor and the delivery address Ship to. The whole PO, PDF included, can be made in any of the 20 invoice languages, which helps when you order from abroad: the title becomes "Bestellung" in German, "Bon de commande" in French and "Inkooporder" in Dutch.