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Purchase Order


 


What is a purchase order?


A purchase order (PO) is an official document listing products or services that a buyer intends to purchase in the future. Created by the buyer for the benefit of the seller, the PO includes a list of the products, quantities and prices, as well as other details about the order. Once signed by both buyer and seller, a purchase order is considered a legally binding contract.



What to include on a purchase order


A purchase order can include any and all of the following details:


  • Date of order

  • Date of delivery

  • PO number

  • Buyer contact details

  • Seller contact details

  • Description of product or services ordered

  • Quantities ordered

  • Pricing

  • Discounts

  • Date of shipment or delivery

  • Payment terms and conditions

  • Buyer and seller signatures



Why purchase orders are important business tools


Purchase orders help both buyers and sellers handle their payments and inventory management. They help sellers track orders, standardize payment terms and know how many products they need to manufacture and by when. A purchase order can also help accounting departments know when to issue an invoice to a buyer and when to expect payment. Finally, the PO protects the seller in case a buyer refuses to pay. Online stores and eCommerce businesses looking to stay organized, can issue POs with Wix eCommerce.


 

You may also be interested in:


Inventory

Invoice

Compensation


 

The difference between an invoice and a purchase order?


A purchase order is created by a buyer, while an invoice is created by a seller. A purchase order is a detailed list of what a buyer intends to purchase. An invoice, on the other hand, is a request for payment issued by the seller and given to the buyer. Usually, a purchase order is created before an invoice is issued.



Purchase order versus purchase requisition


Unlike purchase orders, purchase requisitions (PR) are internal documents. Also known as purchase request forms, purchase requisitions are used by large companies to request approval for a proposed expense or purchase. Most small businesses do not use purchase requisitions.

Related Term

Inventory

Related Term

Invoice

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