A purchase order template is a predesigned document that standardizes the process of creating purchase orders (POs) for businesses. Purchase orders are formal requests issued by a buyer to a supplier, indicating types, quantities, and agreed prices for products or services the buyer intends to purchase. A template helps ensure consistency and accuracy in these documents, facilitating clear communication between the buyer and supplier and helping to streamline procurement processes.
Purchase Order Template Example
This purchase order example will help illustrate the key elements of a PO and how they are structured to facilitate a clear and organized transaction between the buyer and the supplier. Download your template here. 
How do you write a simple purchase order?
Writing a simple purchase order involves including essential information to ensure clarity and avoid disputes. The document typically includes details like the items or services requested, quantity, pricing, delivery timelines, and payment terms.
A well-structured purchase order helps businesses streamline procurement by ensuring both parties understand what is being ordered and under what conditions. It also serves as an internal tracking tool for budget management, allowing procurement teams to monitor spending against forecasts. Furthermore, POs improve supplier relationships by creating transparency and preventing misunderstandings about order details, delivery expectations, or invoicing procedures.
What to include in a purchase order?
Below is a breakdown of the key components of a purchase order,
- Company information
- Purchase order number and date
- Order details like, item description, quantity, and unit price
- Supplier information
- Shipping information
- Payment and delivery terms
Here to give further clarity, we have structured it into 4 elements: header information, order details, terms and conditions, and authorization.
Header Information
- Company Information: Identifies the buyer's business, providing legitimacy and ensuring the supplier knows who is placing the order. Helps in establishing the origin of the order and facilitates any necessary follow-up communication.
- Purchase Order Number: A unique identifier for the PO. Critical for tracking, reference, and record-keeping. It allows both buyer and supplier to quickly locate and discuss specific orders.
- Date: Indicates when the PO was created. Helps in determining timelines for delivery and payment schedules. It also provides a reference for the contract's validity period.
- Supplier Information: Identifies the supplier who will fulfill the order. Includes, Name, address, and contact details of the supplier. Ensures the order is sent to the correct vendor, which is vital for accurate delivery and invoicing.
- Buyer Information: Details of the purchasing company’s contact person like, Name, address, and contact details of the purchasing company. Provides a point of contact for the supplier for any queries or issues related to the order.
Order Details
- Item Descriptions: Detailed description of the items or services being ordered. Prevents misunderstandings by clearly specifying what is being purchased, ensuring the correct items are delivered.
- Quantity: Specifies the number of units required for each item. Ensures the supplier knows the exact amount needed, which is crucial for inventory and cost calculations.
- Unit Price: Indicates the cost per unit of each item. Essential for calculating the total order cost and for budgeting and financial planning.
- Total Price: The cost for each line item (quantity multiplied by unit price). Provides clarity on the expense for each item and helps in verifying the order total.
- Subtotal: Sum of all item line totals before taxes and shipping. Shows the base cost of the order, which is important for accounting purposes.
- Tax and Shipping: Specifies any applicable taxes and shipping costs. Ensures the final cost is accurately calculated and reflects all additional expenses.
- Grand Total: The grand total represents the overall final amount payable for the entire purchase order, including all item costs, taxes, shipping fees, and any additional charges.
Terms and Conditions
- Payment Terms: Details on how and when payment will be made (e.g., Net 30 days). Sets expectations for payment, helping manage cash flow and financial planning for both parties.
- Delivery Terms: Provides details on delivery dates, methods, and locations. Ensures timely and correct delivery of goods, which is vital for planning inventory and operations.
- Legal Terms: Outlines any legal conditions, warranties, or other contractual obligations. Protects both parties by clearly stating the legal framework governing the transaction, which can prevent disputes.
Authorization
- Signatures: Authorized signatures from both the buyer and supplier. Provides formal acceptance and agreement to the terms outlined in the PO, making it a legally binding document.
Benefits of Using a Purchase Order
Using purchase orders not only simplifies procurement operations but also ensures better financial control, reduces risks, and enhances operational efficiency, making it a critical tool for both small and large organizations.
1. Clear Communication and Reduced Errors
A purchase order serves as a formal document detailing the exact goods or services, quantities, prices, and delivery terms. It minimizes miscommunication between buyers and suppliers by ensuring both parties are aligned on what is being ordered and when it is expected. This reduces the risk of order errors, incorrect deliveries, or disputes.
2. Improved Budget and Spend Control
POs act as a control mechanism by tracking approved purchases against budgets. They ensure that only authorized purchases are made, helping organizations avoid overspending or unapproved expenses. POs also provide visibility into upcoming expenditures, which aids in cash flow management and financial forecasting.
3. Legal and Contractual Protection
Once accepted by the supplier, a purchase order becomes a legally binding agreement. This provides legal protection in case of disputes by documenting the terms, prices, and delivery expectations agreed upon. POs ensure accountability from both the buyer and the supplier, fostering transparency in transactions.
4. Streamlined Procurement and Record-Keeping
Using POs standardizes the procurement process, ensuring consistency across all transactions. Purchase orders serve as key reference points throughout the order lifecycle, making it easier for procurement teams to track and manage multiple orders. They also provide organized documentation for future audits and compliance reviews.
5. Efficient Invoice Matching and Payment Processing
POs simplify the invoice processing workflow through three-way matching, where the purchase order, goods received note, and invoice are compared to ensure accuracy. This reduces the likelihood of payment errors or delays and helps avoid duplicate payments. It also ensures timely vendor payments, improving supplier relationships.
6. Enhanced Supplier Relationship Management
Having clear and documented orders through POs improves communication with suppliers, minimizing confusion and delays. Timely and transparent order management builds trust and strengthens supplier relationships, which can lead to better pricing, priority service, and favorable contract terms.
7. Compliance and Audit Readiness
POs ensure that purchases align with organizational policies and compliance requirements. By keeping a detailed record of transactions, organizations are better prepared for internal or external audits. POs also help demonstrate compliance with financial controls, procurement policies, and regulatory standards.
How does a purchase order work?
A purchase order (PO) works as a formal agreement between a buyer and a supplier to document the purchase of goods or services. It follows a structured workflow, ensuring transparency, accountability, and accuracy throughout the procurement process. Here’s a breakdown of how a purchase order works:
1. Buyer create a purchase order
The buyer identifies the need for specific goods or services and creates a PO. This document includes essential details such as item descriptions, quantities, unit prices, delivery dates, and payment terms. The PO is assigned a unique reference number to track the order.
2. Purchase order is sent to internal approval
The purchase order may go through an internal approval process to ensure it aligns with the organization’s budget and procurement policies. Once approved, the PO is sent to the supplier, either via email, e-procurement platform, or procurement software.
3. Supplier receives and acknowledge the PO
The supplier reviews the PO and either accepts it as-is or negotiates any terms if necessary. Upon acceptance, the PO becomes a legally binding agreement between the buyer and the supplier, outlining the expectations for delivery and payment.
4. Order fulfillment and delivery
The supplier processes the order and delivers the goods or services according to the specifications outlined in the PO. The delivery is accompanied by a goods receipt or packing slip to confirm that the correct items have been shipped.
5. Goods is received and inspected
The buyer receives and inspects the goods or services to ensure they meet the agreed specifications. Any discrepancies or issues are communicated to the supplier for resolution. A Goods Received Note (GRN) may be generated to document receipt.
6. Invoice matching and payment
Once the goods or services are verified, the supplier submits an invoice. The accounts payable team matches the invoice with the PO and delivery documentation (three-way matching) to ensure consistency. If everything aligns, payment is processed according to the agreed terms.
7. Closure and record keeping
After payment is made, the purchase order is marked as complete, and all related documents are stored for future reference or audits. POs serve as a key part of financial and procurement records, ensuring transparency and compliance.
Take control of your purchases with purchase order forms
In conclusion, a well-designed purchase order template is essential for streamlining procurement operations and ensuring consistency in every purchase transaction. Create and track POs efficiently by including key components like buyer and supplier information, order details, delivery terms, and payment conditions. Using a template minimizes errors, enhances communication with suppliers, and provides legal protection through binding agreements. Additionally, purchase orders improve budget control and enable smoother invoice processing via three-way matching. Adopting a structured PO process not only saves time but also strengthens supplier relationships and ensures effective financial management.