Purchase Order: Definition, Example, How to Generate [Download Excel Template]

A purchase order (PO) is a formal, legally binding document a buyer issues to a supplier to confirm what they are purchasing, at what price, and under which terms. It organizes procurement, prevents errors, and ensures clear, trackable transactions.

Key Takeaways

• A PO becomes a binding contract once the supplier accepts it, defining quantities, prices, delivery details, and payment terms.
• It strengthens procurement control by standardizing orders, preventing duplicate purchases, and improving spend visibility.
• POs support inventory planning, audit readiness, and accurate invoice matching across the purchasing cycle.
• A quote is only a negotiable price proposal, a purchase order is the confirmed order, and an invoice is the supplier’s request for payment after delivery.
• Businesses can create POs manually, in Excel, or through ERP systems depending on purchase frequency and workflow complexity.

What is a Purchase Order?

A purchase order (PO) is a formal document a buyer sends to a supplier to confirm an order. It states exactly what the buyer wants to purchase and under which terms. Once accepted by the supplier, it becomes a binding agreement that guides delivery and payment.

Basic Characteristics of a Purchase Order

• Issued by the buyer: The buyer creates and sends the PO to the supplier.
• Unique reference number: Every PO has a distinct number for tracking and record-keeping.
• Clear order details: Specifies items/services, descriptions, quantities, unit prices, taxes, and total value.
• Defined terms and conditions: Includes delivery date/place, payment method, payment timeline, and any special conditions.
• Legally enforceable after acceptance: When the supplier accepts it, both sides are obligated to follow the agreed terms.

Purpose of a Purchase Order

A purchase order is an essential tool for any entrepreneur who wants to maintain organization and efficiency in purchasing.

• Inventory control: avoids stockouts or excess products by ensuring you have the necessary items in stock in the right quantities.
• Organization and tracking: makes it easier to track all orders placed, allowing you to know exactly what was bought, from whom, and when.
• Prevention of errors and fraud: formalizes the purchase, reducing the risk of mistakes and helping prevent fraud.
• Financial management: helps control spending, enabling better forecasting and cash-flow management.
• Improved supplier relationships: establishes clear and professional communication with suppliers, leading to better negotiations and partnerships.
• Audit and compliance: keeps a detailed record of transactions, essential for audits and compliance with standards and regulations.
• Simplified communication: documenting details reduces the need for frequent contact.
• Legal protection: purchase orders are legally binding agreements and provide protection in case of disputes.

Mandatory Information in a Purchase Order

Each company has its own specifics, so documents may vary from one organization to another. However, certain fundamental elements must appear in the document, especially because it serves as a legal guarantee for both buyer and supplier. Here are the elements to include:

Purchase Order Example

Below is a sample purchase order template

How to Create a Purchase Order?

A purchase order (PO) is the document that officially confirms what you are buying, from whom, at what price, and under which terms. You can create it manually, in Excel, or through ERP billing accounting software depending on your purchase volume and process maturity.

Manual (on Paper/Doc)

Manual POs are suitable when purchases are occasional and you want a simple, controlled format.

• Use the  purchase order example above as your base template
• Fill in buyer and supplier information
• Enter the purchase order number and issue date
• List items or services with quantities, unit price, and totals
• Add delivery details and payment terms
• Sign and send to the supplier
• Keep a copy for internal tracking

Using Excel sheet 

Excel is a practical option for structured ordering, auto calculations, and basic tracking.

• Open the attached Excel purchase order template
• Fill in buyer and supplier sections
• Enter purchase order number and date
• Add items in the table and let formulas calculate totals
• Fill delivery details and payment terms
• Save the Excel file for records and export PDF to send
• Update your purchase order log with status

Using ERP/ billing or accounting software

This method is best for frequent purchasing, approvals, inventory linkage, and audit-ready tracking.

• Open the Purchase Order module in your system
• Select the supplier so details auto-fill
• Add items or services from the system list
• Confirm quantities, prices, taxes, and totals
• Enter delivery details and payment terms
• Submit for approval if your workflow requires it
• Send the purchase order directly to the supplier
• Track the purchase order until it is closed in the system

France PO Template (Excel Format Download)

Here is the attached ready-to-use France PO template to help you create clear, compliant, and professional purchase orders. It includes auto-calculations, French-format fields, and is fully editable for any business.

Download France PO Excel Template Here

Advantages of Purchase Orders

A purchase order is a key document in the purchasing process. It supports purchasing and inventory control and reduces conflicts between the buyer and supplier.

• Formalize the Transaction: A purchase order confirms the company’s intent to buy. It records the agreed products or services, quantities, prices, and terms.
• Prevent Disputes: A signed purchase order is a binding contract. It states what both parties agreed to, reducing disputes and misunderstandings.
• Track Orders: Purchase orders record what was ordered and received and help manage spending. They reduce processing time, prevent duplicate orders and unexpected invoices, and simplify invoice matching.

What Is the Difference Between a Quote, a Purchase Order, and an Invoice?

Although these terms are similar, purchase orders, quotes, and invoices have distinct roles in the procurement process. See the comparison below.

Conclusion

A purchase order (PO) is a formal, legally binding document a buyer sends to a supplier to confirm an order. It lists items or services, quantities, agreed prices, taxes, delivery details, and payment terms, and includes a unique PO number for tracking. Once accepted by the supplier, it becomes the contract that governs delivery and payment. 

Using POs improves inventory control, reduces purchasing errors, supports cash-flow planning, and provides audit-ready records. It also clarifies expectations, strengthens supplier communication, and helps avoid disputes. Quotes propose costs, POs confirm the deal, invoices request payment.