What is a Purchase Order?

What Is a Purchase Order?

A purchase order (PO) is a formal document sent by a buyer to a supplier requesting goods or services at an agreed price and delivery schedule. It acts as a contract and clearly outlines what’s being ordered, in what quantity, at what cost, and under which terms.

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Purchase orders are a critical part of the procurement process, providing transparency, spend control, and a paper trail that protects both buyers and suppliers.

How Does a Purchase Order Work?

Here’s how a typical purchase order process works:

A team identifies a need for goods or services.
A purchase requisition is created and internally approved.
A formal purchase order is issued to the supplier.
The supplier accepts or declines the PO.
The supplier delivers the goods or services.
An invoice is raised referencing the PO.
The buyer matches the invoice with the PO and approves it for payment.

This process ensures clarity and reduces the risk of disputes. With Zahara, these steps can be automated and tracked through a centralised platform. Learn more about Zahara’s purchase order software.

When to Use a Purchase Order?

Use purchase orders when:

You need to control spending before a transaction happens
Suppliers require formal documentation before fulfilling an order
You want clear internal visibility of committed spend
You’re handling large or recurring orders

Avoid sending POs to suppliers who only accept online orders without documentation. In these cases, a PO serves little purpose.

Key Benefits of Purchase Orders

For Buyers:

Gain visibility into committed spend
Enforce pre-spend approval processes
Simplify budgeting and cash flow planning

For Suppliers:

Receive clear order information
Gain payment assurance from legally binding documents
Streamline fulfilment using standardised formats like CSV or JSON

What Should Be on a Purchase Order?

A good purchase order includes:

PO number
Order date and required delivery date
Buyer’s business details
Supplier’s business details
Delivery address
Currency
Product/service descriptions with SKU or product codes
Quantity of each item
Unit price
Total price
Tax rates
Payment terms
Terms and Conditions

Zahara offers flexible PO templates that include all these fields. You can customise your layout and add links to your company’s full terms online.

Sample Purchase Order Layout

Field	Description
PO Number	Unique ID for tracking
Order Date	When the PO is issued
Delivery Date	When goods/services are needed
Buyer Info	Legal entity and contact details
Supplier Info	Name, address, contact details
Line Items	Products or services, SKUs, quantity, unit cost
Totals	Subtotal, taxes, final amount
Payment Terms	e.g. Net 30, upon delivery
Notes	Special instructions or terms

Different Types of Purchase Orders

There are several types of POs used in business:

Standard Purchase Order

For one-time purchases with fixed terms.

Blanket Purchase Order

Used for repeated orders over a period, often with volume discounts.

Standing Purchase Order

Used for recurring deliveries under the same PO number.

Each type supports different procurement strategies depending on the business relationship.

Format Considerations: PDF, CSV or JSON?

Suppliers may prefer receiving purchase orders in different formats. Zahara supports:

PDF: Ideal for simple, one-line orders
CSV: Easy for bulk item processing
JSON: Ideal for integrations with supplier systems

Ask suppliers what format they prefer to reduce errors and processing delays.

Controlling Terms and Conditions

POs often include payment terms that may conflict with supplier terms. For example:

Buyer’s PO	Supplier’s Invoice
Net 60 days	Net 30 days

Whose terms apply? It depends. Suppliers may reject an order unless terms match, or buyers may enforce their standard terms unilaterally. Clearly referencing your own terms in the PO and linking to them can help establish precedence.

You can edit Zahara’s PO template to include this link in every order sent. See Zahara’s PO templates.

Tips for Better Purchase Orders

Always use the supplier’s product codes
Clearly state the unit type (e.g. box, litre)
Indicate the expected currency
Define your payment terms
Make the document legible and concise
Include a CSV file for multi-line orders
Ensure only authorised personnel send POs

Purchase Orders and Invoice Automation

One of the biggest advantages of using purchase orders is enabling straight-through invoice processing. Zahara links purchase orders, goods received, and invoices into one streamlined workflow. This helps eliminate manual data entry and reduces invoice errors.

Learn more about invoice processing with Zahara

Zahara PO Software vs Manual Purchase Order Process

Procurement professionals, finance teams, and small business owners often weigh the benefits of an automated purchase order system like Zahara against traditional manual PO management. Below is a comparison focusing on three core areas – Cost Savings, Time Efficiency, and Error Reduction – particularly examining how each method handles the key steps of raising a purchase order, requesting approval, and sending the PO to a supplier.

Zahara PO Software vs Manual Purchase Order Process

Dimension	Zahara (Automated PO Software)	Manual PO Process
Cost Savings	According to the American Productivity & Quality Center (APQC), organisations with top-performing PO automation can process a purchase order for as little as $35. Zahara’s automation eliminates paper, manual data entry, and rework — all of which contribute to lower cost per PO.	APQC reports that the median cost to process a manual PO is $217, with bottom performers spending over $500 per order. Labour time, rework, and delays drive costs significantly higher than automated alternatives. APQC Research.
Time Efficiency	World Bank research on e-procurement found that digital procurement platforms reduce processing time by up to 60%. Zahara enables users to raise POs, route for approval, and send to suppliers in minutes — with workflows optimised for real-time approvals.	Manual PO processes often rely on spreadsheets, emails, and physical documents. Delays from approval bottlenecks and data entry extend processing time — with average PO cycles taking 5 to 10 days. OECD E-Procurement Report
Error Reduction	Deloitte research indicates that automation can reduce transaction errors by up to 37% in the procure-to-pay cycle. Zahara enforces required fields, prevents duplicates, and maintains an auditable trail for every purchase order.	Manual POs are prone to miscommunication, missing fields, and data entry errors. The Harvard Business Review notes that human error is a key driver of procurement exceptions and disputes. Deloitte Global CPO Survey

Adopting an automated PO system like Zahara yields clear advantages in cost efficiency, speed, and accuracy. By streamlining the steps of raising purchase orders, getting approvals, and sending POs to suppliers, Zahara helps organizations save money, save time, and avoid errors compared to traditional manual PO management zaharasoftware.com, ascendsoftware.com

. For procurement and finance teams, this means a more controlled and transparent purchasing process that supports the company’s bottom line and operational efficiency.

What’s the difference between a purchase order and an invoice?

Purchase Order	Invoice
Created by the buyer	Created by the supplier
Sent before delivery	Sent after delivery
Outlines what will be supplied	Confirms what was supplied
Includes proposed payment terms	Includes payment due date