Definition
A purchase order (PO) is a buyer-issued document that authorises a specific purchase. It lists items, quantities, agreed prices, delivery date and location, and payment terms. Once the seller accepts it, the PO becomes a binding contract.
The purchase cycle is usually: RFQ → Quote → PO → Delivery → Invoice → Payment. The PO's number is carried on the seller's subsequent invoice so the buyer's accounts-payable team can match the two.
POs serve three main purposes: 1. Internal control — ensures only authorised purchases happen, typically requiring approval above threshold amounts. 2. Cash-flow planning — commitments are visible in the buyer's purchase ledger before invoices land. 3. Audit trail — regulated industries need documentary evidence of every supplier commitment.
Small freelance operations often skip the PO, going straight from quote to invoice. Most enterprise buyers, and many government procurement departments, will not pay an invoice that doesn't cite a valid PO number — so if you're billing large organisations, ask for the PO before invoicing.