Purchase Order — Definition, Functions, Benefits, Example

What is the meaning of purchase order or PO? Purchase Order or PO means a document created to show the goods you want to buy.

The question of the meaning of PO may often arise in your mind at this time. PO itself stands for Purchase Order.

Then the meaning of PO or Purchase Order means a document that is often used in business.

To better understand what PO means? Check out the explanation of the meaning of PO in the article below.

As demand for products increases, business processes become increasingly complex.

If in the past you could easily order materials from suppliers via email or telephone, now supplying is getting difficult to manage.

Purchase order or PO comes as a solution for you.

What Is A Purchase Order Or PO What It Means? More will be discussed here!

The meaning of PO is

What does PO mean? Purchase Order or PO is a document made by the buyer to indicate the goods they want to buy from the seller.

PO means also a contract that forms an agreement between the buyer and seller regarding the goods that the buyer wants to buy.

Unlike invoices, which are created by the seller and sent to the buyer, a purchase order (PO) originates from the buyer and is sent to the seller.

Aspects in Purchase Order

PO means a letter of request for goods with the amount and price listed by the buyer.

A PO has the following components:

  • Details of the companies involved
  • Order date
  • Product name
  • Number of items purchased
  • Price
  • Additional conditions for sales such as discounts.

What Happens After a Purchase Order Is Sent?

Well, above was the meaning of PO as well as an explanation. Then what will happen if this purchase order is sent?

Once the purchase order has been created and sent to the seller, the seller then decides whether to accept the contract or not.

If the purchase order or PO is accepted, it means that the seller has agreed to sell the product and the listed quantity at the price set by the buyer.

The seller then issues an invoice ( invoice ) to the buyer based on the purchase order.

For example, an electrical installation company needs to buy new materials from a supplier to create their product.

The company then creates a purchase order to submit to the supplier from which they wish to order the material.

The supplier agrees to fulfill the purchase order and send the materials to the electrical installation company along with the invoice .

When these installation companies receive goods and invoices, they compare them to the purchase order they sent.

If the documents and goods match, the company will pay the bill.

Now, you understand what the difference between an invoice and a purchase order (PO) means, right?

The Purchase Order’s function is

Once you know the meaning of PO, now you have to understand its function as well.

Although it looks quite complicated to order goods from suppliers using a purchase order .

However, the purchase order with the PO will provide a sense of security from additional fraudulent actions and secure the availability of materials at the desired price

Some things to consider in making a purchase order :

  • As a buyer, state the company identity clearly in the purchase order.
  • Include details of what you will order, such as brand, item name, quantity, and other information.
  • Clearly state the manufacturer or supplier you choose.
  • Mention the media as a place to advertise the products offered (if deemed necessary).
  • Mention the form and number of orders in detail, if needed make a list in a table to make it easier to search and service.
  • Please state the shipping method, delivery time, payment method, and also the shipping method you want.
  • Include the PO number (purchase order). This number is very important to do a search if there is an error or problem.

Benefits using Purchase Order ( PO )

Although it looks quite complicated to order goods from suppliers using a purchase order .

However, the purchase order will provide a sense of security from additional fraudulent actions as well as securing the availability of materials at the desired price.

Some of the PO functions include:

Avoid double order

When the company gets a PO from a customer, it means the company gets an order so that the company gets a profit.

An example of the most important PO Purchase Order function is to help avoid duplicate orders.

When a company decides to scale its business, POs can help keep track of what has been ordered and from whom.

In addition, when buyers order similar products, it is difficult to match invoices.

PO serves as a document to check invoices that must be paid.

Track incoming orders

One example of a PO is to help track incoming orders.

A well-organized purchase order system can help simplify inventory and shipping processes.

Serves as a legal document

POs serve as legal documents and help avoid future disputes regarding transactions.

Example of a Purchase Order (PO) Form

Generally, the PO document must include the following details:

  1. The name of the product or item ordered
  2. The quantity of each product or item ordered
  3. The price of each unit of product or item ordered
  4. The total price is according to the price per unit and the quantity ordered
  5. Value Added Tax (VAT)
  6. Number
  7. Transaction date and payment due date
  8. Authorization Column

The following is an example of a purchase order from a coffee shop business :

Things to Pay Attention to in Making a Purchase Order:

Some examples of things to consider in making a PO Purchase Order:

  • As a buyer, state the company identity clearly in the purchase order.
  • Include details of what you will order, such as brand, item name, quantity, and other information.
  • Clearly state the manufacturer or supplier you choose.
  • Mention the media as a place to advertise the products on offer (if deemed necessary).
  • Mention the form and number of orders in detail, if needed make a list in a table to make it easier to search and service.
  • Please state the shipping method, delivery time, payment method, and also the shipping method you want.
  • Include the Purchase Order number . This number is very important to do a search if there is an error or problem.


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