Purchase Order: What Is It and How Do You Create One?

If you spend a good amount of time acquiring goods and services for your business, you probably interact with purchase orders several times a day, if not several times per hour.

Purchase orders fuel everything from the ability to streamline the process of acquiring goods and services to tracking inventory, managing payments as well as handling supply shortages. 

The reason why purchase orders are so important, for businesses big and small, is because they ensure radical transparency in the order journey. It helps you trace the path of your finances, from the purchase of raw materials to the inventory of your company. 

Purchase orders (PO) even act as building blocks for your financial audits. However, businesses often play down their role since they seem too time and resource-intensive. But that’s only the case if you’re creating purchase orders from scratch.  

When you place a big order or involve multiple stakeholders, it makes much more sense to use a standardized purchase order template. This way, your team knows exactly what format to use and what details do they need. 

Now that you have a high-level understanding of a purchase order, let’s dig into the details.

In this article, you’ll understand what’s a purchase order, how purchase orders work, how to create a purchase order and get free templates to quickly get started. 

Table of Contents

• What Is a Purchase Order?
• How Do Purchase Orders Work?
• Purchase Orders vs. Invoices
• How to Create a Purchase Order
• 7 Purchase Order Templates

What Is a Purchase Order?

A purchase order (PO) is a business document created by a buyer and sent to a seller. It consists of crucial information including details like order date, quantity and types of products/services, the agreed-upon buying price, payment terms and mode, and date of delivery. 

Each PO has a unique identification code linked to it that enables both buyer and vendor to track delivery and payment.

In a nutshell, purchase orders help both the buyer and seller document transactions, providing an official record to protect them in the event of any disparities, miscommunication, or problems with the order. 

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How Do Purchase Orders Work?

Creating purchase orders is a pretty simple and straightforward process.

Sure, it has a lot of moving parts and information flowing in from different teams at the company — from getting order requirements to budget approval to resource allocation. That’s why you need to streamline your process.

With a platform like Visme, you and your team can easily design purchase orders, add comments, share feedback, and collaborate together in a single dashboard. 

Imagine this. Let’s say you’re from human resources and often need laptops for new employees. Here’s the purchase order journey you might want to use to get the products you need:

1. Gather basic information like the number of laptops required, budget, and approximate date of delivery.
2. Choose a template from our library and create a purchase order with all the relevant details and send it to the seller. If the seller has the inventory to fill the order, they’ll accept the purchase order. 
3. After that, they will deliver the items on the agreed delivery date and raise an invoice. 
4. The buyer will then validate the invoice as per the purchase order raised and the payment will be made to the vendor through the seller’s POS system. 

Ready to create your product order? Use our sleek, pre-designed templates to get started. We have a rich collection of customizable templates to choose from.

Whether you need a purchase order for your small startup or your enterprise, we offer users the flexibility to not only use our templates, but customize them as per their needs. 

Purchase Order Templates

Create a stunning invoice or purchase order online quickly and easily by getting started with one of Visme’s premade templates. Find a free template that you can easily customize for your own purposes.

Clothing Store Invoice

Furniture Store Invoice

Gardening Invoice

Tech Service Invoice

Power Gym Invoice

Black Dress Store Invoice

Create your purchase order View more templates

Now that you have a clear picture of what a purchase order is, let’s walk through the process of creating a purchase order. 

1. The buyer creates a purchase order. 

Firstly, list out all the essential fields you need in your purchase order. This could include aspects like item descriptions, unit cost, total cost, billing, and shipping address, and more specific ones like “approved by” and “designation.” 

For instance, if you’re sending holiday gift boxes to your employees for the festive season, calculate how many boxes you’d need, an approximate quantity, and when do you need them delivered. 

You can also add custom pricing terms or payment transaction details, depending on your needs. In a nutshell, your purchase order should provide a clear and concise view of your order from a seller. 

2. Buyer sends out a request for approval to internal team members.

Prior to sending the purchase order to the seller, take some time to get the necessary approvals from your team members. Share your purchase order with your internal team. You can use a consistent purchase order template that includes custom fields for each order. 

To help maintain clarity and accountability, collaborators can add comments to the purchase order template, provide feedback, or even customize it further.

This will save you and your team the time and resources you’d otherwise spend in going back and forth. So, even though you have a standardized template in place, it still provides the flexibility to adjust each purchase order differently. 

If you frequently use purchase orders, it needs to be the easiest to access and visible doc in your database.

Even if it’s just two people in your team approving the PO, it’s crucial to make sure both parties are on the same page. Otherwise, you run the risk of miscommunications, especially related to budget and quantity. 

3. The purchase order is sent to the seller.

Once approved, the purchase order is sent to the seller. A good practice to speed up the process is to provide a timeline to the seller for their approval. This time should also be devoted to giving and asking for any questions or additional requests. 

Sounds simple enough, but unfortunately, it’s a common failure. Sometimes, a supplier may change prices while the order’s in process, i.e., between the date of order and date of delivery. That’s hours of wasted time in miscommunication and may even lead to delayed orders. 

Getting a purchase order signed from the seller can ensure that both buyer and seller have clarity and mutually agree to the deliverables. This way, there’s minimal risk of miscommunication. 

4. Seller reviews the purchase order and confirms the PO. 

Once the buyer sends the purchase order to the seller, they review it and confirm if they can fulfill the order. This largely depends on some key factors like inventory, availability, price, and date of delivery. 

When the seller confirms the purchase order, it becomes a legally binding contract. After this, you can expect your seller to send an approved copy of the purchase order back to your team. 

5. Products or services are fulfilled. 

After the purchase order is approved, the seller is responsible to ship the goods and services to the buyer. At this stage, sellers may also generate an invoice to the buyer for the amount indicated in the purchase order. The invoice will entail order details such as the quantity and price of the goods and services. 

While this step might seem redundant to some people, it’s an important one as it helps you validate and authorize payment to the vendor. Let’s look at it this way. When your startup is small, fewer people will be working on purchase orders and invoicing. Less people, less accountability, and fewer auditory compliance requirements. 

However, if you’re a growing company, you need proof of any/every financial transaction to be properly stored and managed for accounting purposes. Getting an invoice will help you track your company’s expenses and maintain a record of your orders. 

6. The purchase order is settled. 

By following this workflow and process, you can optimize how you create and manage your purchase order. Once you have received all the goods and services and paid the invoice, you can close the purchase order. In other words, consider it settled. 

Purchase Orders vs. Invoices

Purchase orders and invoices are often thought of as one and the same. And while both of them are legally binding documents that buyers and sellers exchange, they’re not the same. 

A purchase order is created by the buyer, before the goods and services are shipped, and sent to the seller. An invoice, on the other hand, is created by the seller, after the goods and services have been delivered, and sent to the buyer.

We have templates for both available right inside Visme.

How to Create a Purchase Order

The earlier you start using purchase orders within your company, the sooner you can chip away at problems that plague your orders, like price fluctuations, delayed deliveries, ineffective buyer-seller experiences, to name a few. 

Using a professional tool to create purchase orders with different vendors will help you manage them with much more speed and efficiency. Here’s a quick checklist to creating your purchase order:

1. Choose a template. 
2. Add issue data. 
3. Write the PO number.
4. Add business information including the billing address for the buyer and the seller. 
5. Mention product details including item descriptions, model numbers, quantity, and so on. 
6. Mention the delivery date.
7. Add terms and conditions, such as “advance payment fee,” or specific payment modes like “cash,” “check,” or “online transaction.” 

7 Purchase Order Templates 

We know you might already be creating purchase orders for a while, but sometimes a quick reset makes the process even easier, especially if you’ve been having a hard time tracking each and every single order.

As a refresh, here are seven purchase order templates that you can use every day:

1. Services Purchase Order

A services purchase order is created by a buyer when they get services from a vendor. Because service is an intangible material, meaning it cannot be stored in inventory management data, a service purchase order helps maintain a record of such transactions. 

Let’s take an example. You want carpet cleaning services for your office, so you contact a vendor. Now, the vendor charges on a square/ft basis. The total area of the carpet is 3,000 square feet and the vendor agrees at $5 per square foot.

So, the total purchase order value is $15,000. Now, you can formalize requirements and pricing using a service PO. This way, not only do you and the vendor have a legally binding contract, but also help you with internal financial approvals and auditing. 

2. Contract Purchase Order

A contract purchase order (CPO) is the most formal type of purchase order. It is used by the buyer to establish a contract in place with a seller when a buyer can not precisely define the specific items, quantity, or other details at that moment.

Instead, both parties mutually agree to terms and conditions and set standards for future transactions. 

A CPO is mostly used when there’s a formal long-term agreement between the buyer and supplier. Typically, they’re created for a set period of time which may last upto a year. 

3. Blanket Purchase Order

A blanket purchase order (BPO) is an aggregation of multiple orders into one PO. It’s typically created to secure a negotiable discounted pricing from the seller.

BPOs are used when the buyer knows the details of the goods/services they want, but are uncertain of the timing and quantity of goods. 

The pricing for the goods/services may or may not be included in a blanket purchase order.

For instance, a company keeps investing repeatedly in reams of paper, but they’re not sure how many or when they will need to order next. In this case, a company might send a blanket purchase order to a seller. 

4. Ecommerce Purchase Order

Unless you’re manufacturing your own product, you need to get in touch with suppliers to build your inventory. By using an eCommerce purchase order, you can streamline the process for both yourself and the vendor - document products, quantity, prices, and terms and conditions (if any). 

Here’s a ready-to-use template for eCommerce business owners.

Whether you’re just starting out, or scaling your existing eCommerce store, you can modify this template as per your needs with just a few clicks. Remember, the more detailed your purchase order is, the less room for miscommunications (especially price disparity) with your supplier. 

5. Software Purchase Order

There are many different software purchase order templates out there. But a good one makes sure that your business gets the inventory it needs as easily and quickly as possible. 

After a series of tests and trials, we’ve realized that companies need an easy and quick way to templatize their PO requirements - and that means designing a purchase order that comes with all the must-have fields along with an option to add some custom fields. 

Here’s a software purchase order template that you can use right away:

6. Wholesale Purchase Order

A wholesale purchase order is a document that records all wholesale orders including the number of products, price of each product, and the total amount. It’s primarily used by manufacturers, traders, retailers, exporters, and wholesalers.

A good wholesale purchase order template consists of a form field about the buyer, shipping information, order details, payment information, price, quantity, and amount of each product. 

Here’s a wholesale purchase order that you can use:

7. International Purchase Order 

If you’re an exporter, importer, distributor, trader, broker, logistics professional, or into shipping lines, airlines, international trucking firms, this international purchase order will come in handy to you.

Usually, an international PO consists of a binding offer and is often the first legally formalized document for both the buyer and seller. 

Here’s an international purchase order template that you can use to buy products globally. 

Create Your Own Purchase Order

Creating a purchase order might seem like a daunting task at first. However, it’s a crucial process that’ll help you streamline your business finances. Especially to maintain a record of your purchases and inventory, as well as speed up your financial audits.

To help you kickstart your purchase order creation and optimization process, you can use these ready-to-use purchase order templates.

Learn how to create purchase orders quickly with all the resources Visme has in store for you. Sign up for Visme's document creator today to get started. 

Written by Aarushi Singh

Aarushi is a B2B SaaS copywriter and content strategist. Being a software engineer, she has a knack for tech products and truly understands SaaS which helps her create value-packed content for B2B audience.