As a buyer you’ll create your own purchase order which you can tailor to your specific needs. This is different to using an order form template provided by your vendor.

If you use your vendor’s order form, you will be placing orders on their terms, not your own. Make sure you have a good purchase order template that specifies quantity, product item numbers, and payment terms.

Once signed, a purchase order is a legally binding agreement between buyer and seller, authorized by the management of both companies.

Having a PO makes it easier to track and invoice sales, as the unique purchase order number is used throughout the transaction. By having an official approval in place before an order is completed - and a shared reference to allow transparent billing - errors and misunderstandings can be reduced.

A purchase order is prepared and issued by the buyer before a business transaction can take place. It details the exact products or services required, the quantities, and price. If the seller agrees to the terms of the order, they can approve and sign. Once signed, the purchase order becomes a legally binding document and the seller is obliged to complete the order in accordance with the terms in the PO.

An invoice is issued by the seller - usually after the order is completed, and as a way of requesting payment. The invoice includes many of the same details as the PO - and confirms how much the buyer needs to pay, and under what terms. The invoice should also include the PO number as a reference.