What Is a Purchase Order?

A purchase order is an official document issued by a buyer to a supplier, outlining the goods or services they wish to purchase. It includes essential details such as quantity, price, delivery timeline, and terms of payment. By issuing a purchase order, businesses establish a formal agreement that helps prevent miscommunication and ensures accountability for both parties.

Why Are Purchase Orders Important for Accounts Payable?

Purchase orders play a critical role in the accounts payable (AP) process, offering the following benefits:

• Improved Spend Control: POs provide visibility into approved expenses before an invoice is received, helping finance teams manage budgets effectively.
• Streamlined Invoice Matching: The accounts payable team can easily match incoming invoices to purchase orders, reducing errors and ensuring accurate payments.
• Audit Trail Creation: A purchase order acts as a formal record of the agreement, simplifying audits and dispute resolution.
• Faster Invoice Processing: When suppliers reference POs on invoices, it allows for seamless automation and straight-through processing (STP) in AP software like Zahara.

Purchase requests/requisitions can be used for all spend. Think of them as pre-spend approvals. Purchase Orders should only be sent to suppliers though who require them and you know will act on them. If your supplier only processes orders placed online, sending them a purchase order is pointless. 

Choosing the format of the purchase order is also important. If you are sending simple one-line orders then a PDF purchase order is suitable. If you are sending complex multi-line orders you should enquire whether a format like CSV or JSON is more suitable for them. Ask your supplier what can you do to facilitate better order processing accuracy and faster processing of your orders. Zahara can accommodate these three formats. 

The benefit of purchase orders for you as a business, or at least requisitions,  is that you now have advanced warning in the finance team of an expected invoice. If you are sending your suppliers purchase orders, invoice automation with straight-through processing is now likely. 

Zahara has a number of Purchase Order Templates you can choose from and then a selection of fields that can be placed on the template. The key parts of the purchase order are 

• The date of the order
• The date the goods or service are required
• Your legal entity – who is the buyer
• The suppliers details – the seller
• The delivery address
• The currency 
• The items you wish to purchase – use product codes wherever possible to avoid errors
• The quantities you require
• The price you expect to pay 
• The tax rates you expect to be charged
• The payment terms you expect 
• The terms and conditions you expect this order to be made under – theirs or yours

There is often a battle with a purchase order between buyer and seller over whose terms apply. The buyer states with their purchase order, “I would like you to supply these goods and service at this price, subject to my terms”

The seller, your supplier, will supply the goods or services, though, subject to their terms. They may have terms and conditions on their website or have made you sign an order form.

Payment terms are an example of this. The supplier will expressly say, “Payment is 30 days from the invoice date”. The buyer may state on their purchase order that they only pay in 60 days. In some circumstances, this may be a case of who blinks first if the seller holds back the order until you agree to the terms. The buyer may simply ignore the payment terms stated. 

You can reference the key terms on your purchase order. You can edit your Purchase Order template in Zahara’s Business Settings. You may also like to provide a hyperlink to a Terms and Conditions page or PDF on your website. 

Here are some tips for creating a good purchase order. 

1. Use the supplier’s product codes so they know exactly what to supply. 
2. Use a unit field to state what type of product you expect.
3. State the currency you expect to buy in. 
4. State your expected payment terms. 
5. Make the purchase order clear.
6. If possible, send a CSV file along with the Purchase Order PDF to help them process the order more easily.
7. Make sure Purchase orders are sent by authorised personnel only – control your costs 

With Zahara’s accounts payable automation software, creating and managing purchase orders is effortless. Features include:

• Multi-Format Support: Zahara supports PDF, CSV, and JSON formats for POs.
• Delivery Tracking: Receipt goods with Zahara’s GRN feature.
• Invoice Matching: Automatically match POs with invoices to reduce manual processing.
• Workflow Automation: Customize approval workflows to ensure only authorized personnel issue POs.

Why Are Purchase Orders Critical for Accounts Payable?

Purchase orders provide the accounts payable team with advance notice of expected invoices, enabling faster approvals and payments.

How Do I Share a Purchase Order?

In Zahara, you can share POs by:

• Sending them via email within a workflow.
• Downloading and emailing the document manually.
• Using Zahara’s built-in PO communication features.

What Happens If a Supplier Doesn’t Accept POs?

Some suppliers may prefer direct online orders. In such cases, consider integrating Zahara with your supplier’s ordering platform for smoother transactions.

Purchase orders are more than just procurement tools—they’re an essential part of the accounts payable process, ensuring better financial control, compliance, and efficiency. With Zahara, businesses can automate the purchase-to-pay cycle, improving accuracy and reducing costs.

Take control of your purchase orders today!